Displaying items by tag: bonds

(New York)

Famed bond fund manager Jeffrey Gundlach loves to put out scary warnings about the markets. Naturally, he often focuses on fixed income and macro themes. However, today he has a new prognostication. Gundlach says that Bitcoin is a good barometer for the direction of stocks. “Strangely, bitcoin seems to be the poster child for social mood and market mood”, says the bond fund manager, continuing “If stocks are going to take another tumble, I think it would be preceded by a bitcoin decline”.

FINSUM: We don’t think bitcoin and stocks have much relationship to each other. The factors that caused Bitcoin to fall (mostly regulatory concerns) have very little to do with why stocks fell.

(New York)

Despite a seemingly very hawkish Fed, bond traders just aren’t buying it, according to Bloomberg. Traders think the economy is burning very hot, and that the Fed, despite rhetoric, is actually content to just stick to only gradual rate hikes. According to one CIO, “The bond market is telling the Fed we see rising inflation pressures and if you are going to be gradual and crawl into three more rate hikes this year we are not going to wait around”, continuing “The long end of the yield curve is tightening for the Fed”.

FINSUM: Fed minutes did not show that the bank was considering four hikes this year, and the market thinks they should be.

(New York)

Many investors are currently worried about the bond market. There is a lot of uncertainty over just how much rates and yields will rise and what that might mean for the economy. Well, Bloomberg is taking a strong stand on the issue, arguing that a bond Armageddon is on the way. The paper says that all the focus has been on ten-years, but that 30s might be where the danger is. They are within shouting distance of their 2015-2017 highs, and are very close to the 3.24% level, which would signal the difference between an orderly selloff and a full-on rout.

FINSUM: There may be some short-term volatility, but our overall view is that there won’t be a cataclysm in bonds. Global populations are aging and people need income. We expected yields to stay in check and spreads to narrow even if sovereign yields rise.

(New York)

In an article that contrasts strongly to some others we are running today, here is a different view on bonds coming out of the Wall Street Journal—that the bull market is far from over. The argument is based on two interconnected factors. The first is that rates and yields do look likely to rise in the short term, but at the same time, there are many signs the business cycle is poised to end, which will bring on a recession. When that happens, yields will once again plunge, keeping the bond market surging.

FINSUM: If a recession does come then rates and yields will likely drop again. Unless of course inflation sticks around and we get caught in a stagflationary period.

(Washington)

Whether one likes it or not, Treasury yields hitting 3%, which they look bound to do, will be a major event. The big question is what to do once it happens. Is it the signal of a sharp move higher in yields, or will it be the climax to a short-lived selloff? The reality is that if Treasuries move just a little above three, there could be a strong wave of selling. However, strategies betting against volatility have been paired back in recent weeks, so the selling might not be as furious as one might fear.

FINSUM: Nobody has any idea what will happen if Treasuries move above 3%. As far as bonds, we expect that there will be more and more organic buyers above 3%, which should keep things in check. On the stock side, we do not see why a move higher would be too bad, as the spread to equity yields will still be wide.