Displaying items by tag: Treasuries

Friday, 21 December 2018 13:58

So the Fed Isn’t Tone Deaf

(Washington)

For the last few weeks, the Fed looked like an out of touch ivory tower central bank committed to driving the US economy into a recession through relentless rate hikes (or at least that was the anxious view). However, the Fed has finally made an announcement which gave investors some calm. The head of the NY Fed commented that being “data dependent” meant listening to markets too, not just the economy. He also contextualized the language from the last Fed meeting, softening its impact. The market jumped immediately on the news.


FINSUM: Too bad it isn’t Jerome Powell making the comments. That said, the Fed must be starting to get nervous that we are close to a bear market.

Published in Bonds: Treasuries
Friday, 14 December 2018 11:29

Treasury Bears Just Broke

(New York)

There has been a large segment of money managers and investors that have taken a bullish stance against Treasuries. With rates rising and the economy performing well, it stood to reason that yields would keep on rising. However, after a couple of months of brutal stock volatility and worries over a trade war and growth, investors are finally shedding those bearish short positions. The stance was one of the most popular of the year, but the volume of bearish positions has shrunk by two-thirds since from the record it reached in late September.


FINSUM: The ten-year yield now looks more likely to fall than rise given the longer-term economic outlook and trouble in stocks.

Published in Bonds: Treasuries
Wednesday, 05 December 2018 12:12

What Will Save This Stock Market?

(New York)

There is a lot going against equities right now. A trade war, rising rates, a weaker 2019 earnings outlook, a fading tax effect, and high valuations. There is one more to add to the list, and it could end up being the worst of all—stocks are now yielding significantly less than short-term bonds. Two-year Treasuries are yielding 2.82% while the S&P 500 is yielding just 1.9%. Yields better than bonds had been an incentive for investors to put money in stocks for years, a phenomenon called “TINA”, or “there is no alternative”.


FINSUM: With all the volatility and headwinds facing equities, and relatively unattractive yields as well, it is hard to see what force is going to swoop in to help out stock indexes.

Published in Eq: Total Market
Tuesday, 04 December 2018 14:52

The Yield Curve Just Inverted

(New York)

Pay attention, the yield curve just inverted. And we are not talking about some esoteric swap rate most have never heard of. Yesterday the spread between two-and five-year Treasuries fell below zero, the first major inversion of this bull market. The 2- and 10-year spread is the most typical benchmark for gauging an inversion, but the 2- and 5-year is significant. Yield curve inversions are one of the most accurate predictors of recession, with one preceding the previous several recessions.


FINSUM: One very important thing to remember is that it often takes many months (or years) for a recession to begin once a yield curve starts, so there is still plenty of room for the economy (and markets) to run.

Published in Bonds: Total Market
Thursday, 15 November 2018 14:16

Goldman Sachs Says Yield Inversion Looms

(New York)

With all the volatility of the last month, and midterms, less focus has been on one of the most ominous of economic signs—the yield curve. Well, Goldman Sachs has just weighed in, warning investors that a yield curve inversion is looming. Goldman went further than to say that 2-years might be flat or overtake 10-years, the bank said that spreads between 2- and 30-year bonds would fall to zero. To put that call into perspective, it would be a narrowing of 50 basis points versus now. Goldman highlighted the move in its top themes to watch for 2019.


FINSUM: We have to give Goldman Sachs a little credit here as they have been consistently hawkish about rates for at least a year and are sticking to it. We tend to agree with this view.

Published in Bonds: Treasuries
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