Displaying items by tag: rates

Wednesday, 02 May 2018 16:48

Investors are Fleeing Into Cash

(New York)

Investors beware, the market might be losing its nerve. Back and forth markets for most of this year appear to be making investors very wary, as the market is fleeing to cash. Investor holdings in “cash sanctuaries”, which include money market funds, are approaching 2%, the highest level seen in a decade. According to one prominent asset manager “Cash is an asset class once again”. According to Crane’s, “Money funds were on a starvation diet with yields at zero percent … Rate increases have given them a stay of execution”.


FINSUM: Aside from volatility, the other big driver is that yields on money market funds have risen considerable alongside the Fed hikes, making them much more attractive.

Published in Macro
Tuesday, 01 May 2018 02:22

JP Morgan Says Market Will Collapse

(New York)

JP Morgan has just put out a guide which may be very interesting to investors—a manual for how to navigate the end of easy money. The bank thinks the equity market’s response to earnings has been very worrisome lately, and they are very bearish. The bank recommends that in 2019, investors go underweight equities and long gold and long duration as the economic cycle ends and real rates “collapse”.


FINSUM: This is an extraordinarily bearish outlook from JP Morgan, and it seems mostly dictated by weakness in equity prices lately. Investors should take this warning seriously.

Published in Macro
Tuesday, 01 May 2018 02:22

Will Junk Bonds Hold Up?

(New York)

Something very interesting is going on in the junk bond market—things are good. The market for risky corporate debt has seen a resurgence over the last couple of months, and even as benchmark yields have risen, returns for junk bonds have been positive. The spread between high yield and benchmark Treasuries has shrunk from 369 basis points to just 333 basis points since February 9th.


FINSUM: This is a very important move as it it is a positive sign about the business cycle. Junk bonds and other credits have often been leading indicators, and the fact that investors are still showing faith in them is very positive.

Published in Bonds: Total Market
Thursday, 26 April 2018 05:48

Why Financials Aren’t Rising

(New York)

Something very odd is happening in the stock market. Despite the fact that rates look likely to rise and yields are rising sharply, financial stocks are losing ground. This is the opposite of what one would expect, as higher rates boost profit margins for banks and the like. No one is quite sure why, but it seems that instead of boosting hopes for earnings, higher rates have investors worried about a weaker economy to come, which would be negative for banks, which are quite tied to economic performance.


FINSUM: To us this is a quite a bearish view, as it indicates that investors see stagflation coming on (higher rates with zero or negative growth.

Published in Eq: Large Cap
Thursday, 26 April 2018 05:44

Investors are Diving into Short-Term Bonds

(New York)

Alongside the rise in bond yields, investors have been pouring money into short-term bonds, says Barron’s. With rates and yields rising, short-term bonds have less rate risk. But even more, their yields look very attractive versus long-term bonds. Two-year treasury yields are now over 2.5%, versus just 3% on a ten-year note.


FINSUM: Why wouldn’t one be putting money in short-term bonds right now? They are relatively insensitive to rate hikes and are offering solid above-inflation yields.

Published in Bonds: Total Market

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