Displaying items by tag: correction

Friday, 03 September 2021 09:53

Bond Legend Warns of Huge Correction

(New York)

When you say bond legend, only one name likely comes to mind (let’s leave Gundlach out of this for a minute): Bill Gross. And old Bill always has an opinion, and this week it is a very strong one: “bonds are trash”. Bill says that bonds are now in the investment garbage can because Fed tapering in the first half of 2022 will likely cause a rise in Treasury yields from 1.3% now to 2% next year, causing an overall loss of around 3% over the next 12 months. According to Gross, “Cash has been trash for a long time but there are now new contenders for the investment garbage can. Intermediate to long-term bond funds are in that trash receptacle for sure”.


FINSUM: This is logically sound, but the timing is entirely dependent on the Fed.

Published in Bonds: Treasuries

(New York)

While most banks try to stay bullish on market, Bank of America just couldn’t help but get gloomy this week, very gloomy. The bank says that record high prices and placid volatility mean a big correction looms. They believe the market is underpricing the risk of a Fed policy change, and when that comes, it will hit like a hammer. They even gave a name to these bouts of volatility/correction: “fragility shocks”. According to the bank, “We believe the US equity market is underpricing the risks of a looming tapering cycle. After all, the equity market has feasted on record monetary support post-COVID, and the Fed's outlook remains impaired by the extreme uncertainty in the macro forecasts on which they base their decisions”.


FINSUM: This unfortunately makes quite good sense. However, the opposing force here is that the buy-the-dip mentality is strong right now, which could provide support in any short-term sell-off.

Published in Eq: Large Cap

(New York)

According to a poll of leading bond strategists surveyed by Reuters, there is likely to be a correction in…see the full story on our partner Magnifi’s site.

Published in Bonds: Total Market
Friday, 02 July 2021 16:52

Yields Look Ripe for a Correction

(New York)

Another jobs report hit the tape today, and another good reading, with job growth outpacing expectations. Crucially, there were also no signs of heavy wage growth that could stoke the market’s inflation fears. According, Treasury yields fell across the board, with the short end of the curve falling the most. Analysts feel that the report did not bring the dreaded Fed Taper any closer, which led to the fall in yields. Fed minutes will be released next week and that is the next time the market will get a peek into what the central bank may do next.


FINSUM: Two divergent paths here—either the market is falling into complacency, or the Fed’s view that inflation is “transitory” is starting to come true. It might only take an errant sentence form the Fed to spark a big correction.

Published in Bonds: Total Market

(New York)

According to a poll of leading bond strategists surveyed by Reuters, there is likely to be a correction in bond markets in the next three months. The reason why is that central banks across the world are all looking for the exits from their stimulus programs. The head of strategy at Rabobank commented that “The message from Powell is: We will look through it (inflation). We're not going to jump to conclusions and that creates some calm. But you just need a couple of big surprises (in data) and things are again open to correction”. 59% of those strategists surveyed said they saw a “significant” sell-off in global bond markets coming in the next three months.


FINSUM: This all depends on timing and signaling. If the Fed makes an inadvertently hawkish statement, you could easily see a 2013-style Taper Tantrum. But if the Fed uses careful wording and guidance, the whole transition could be smooth.

Published in Bonds: Total Market
Page 2 of 13

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…