Displaying items by tag: Treasuries

Monday, 12 August 2019 12:28

US Yields Will Go Negative says Pimco

(New York)

The US’ leading bond manager has just made a bold call. Pimco thinks that US bond yields will follow Europe and go negative. Speaking about the market situation more broadly, Pimco says “The next several years could be the exact opposite of what we saw in the past five to 10 years … That was high returns on financial assets and low volatility. That will be turned upside down”. Pimco is particularly concerned about a recession, believing it would send yields sharply lower. However, that is no sure bet, because if the trade war gets sorted out sooner than expected, yields would likely move higher quickly.

FINSUM: Yields moving lower seems to be the path of least resistance, so we think that is the direction that bonds will trend.

Published in Bonds: Treasuries
Thursday, 08 August 2019 08:06

The Bond Market’s Dotcom Moment Has Arrived

(New York)

One of the world’s most respected financial columnists—John Authers—has just put out an article arguing that we may be at the bond market’s Dotcom moment. Authers cites the gigantic hoard of negative yielding debt, as well as many charts of soaring 100-year bond prices (check out Austria’s and Mexico’s), to show that the bond melt up may be set to reverse. He argues that at some point soon (it could have already started with the reversal in ten-years yesterday) that investors will revolt against super-low yields, sending prices lower and yields higher. Authers thinks the spark may be unexpectedly higher inflation, which would undermine the whole premise of recent gains. Tariffs are inflationary by definition, so it is not far-fetched to think this could occur.

FINSUM: We think it would take a significant catalyst to cause a big bond pullback (like a much higher than expected inflation report, a suddenly hawkish Fed etc). That is not out of the question, but it does not seem likely.

Published in Bonds: Treasuries


The Fed has historically been the level-headed kid at the party, always trying to calm things down when they got out of hand. But that appears to no longer be the case, as Powell surprised even the most dovish investors with his very soft statements last week. What comes next may shock markets—some think the Fed will make a rare 50 bp cut in their July meeting. How the market would react is anyone’s guess (likely positive initially). “Historically the Fed has wanted shock and awe when they ease”, says the CIO of Northwestern Mutual Wealth Management.

FINSUM: The Fed seems like it wants to go big, despite the fact that unemployment is at record low levels and prices are stable. The central bank clearly wants to keep the bull market rolling.

Published in Bonds: Treasuries
Thursday, 20 June 2019 10:12

Treasuries are Sending a Grave Signal

(New York)

If you could time travel back to December, it would be hard to find anyone in the world that would have thought that six months later, ten-year Treasury yields would be back under 2%. The turnaround has been so stark and so dramatic, that it is hard to fathom. The yield is now at its lowest level since 2016, with investors fearful of the economy and anticipating several Fed rate cuts.

FINSUM: The big question is what this means. Consider that the yield curve has been inverted for over 90 days. This seems like a very clear recession signal, yet economic data continues to hold up.

Published in Bonds: Treasuries
Monday, 17 June 2019 09:55

Major Recession Threshold Just Crossed

(New York)

Whether investors like it or not, a recession is coming. One of the key indicators is for a yield curve inversion to last 90 days or more. If it does so, a recession is highly likely in the next 12-18 months. Well, the first point of inversion began in March and we just crossed the 90-day threshold, which means that the strongest indicator of recession has just been triggered. Here are some tips to prepare: clear out garbage holdings from your portfolio (e.g. the stock tip from your brother in law six months ago), set aside cash and come up with a plan to buy stocks when certain thresholds are hit (e.g. a 25% decline in key indexes), pay down debt (it might not be this easy to do so again for awhile).

FINSUM: For all the talk we have heard over the last year about “this time is different”, the reality is that the strongest recession indicator known has just been triggered.

Published in Bonds: Treasuries
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