Displaying items by tag: Treasuries

Tuesday, 21 August 2018 09:13

Trump Criticizes Fed

(Washington)

Trump spooked currency and Treasury markets yesterday. Speaking in the context of the US’ trade tussle with China and others, Trump said he wasn’t thrilled with the Fed’s interest rate hikes. He said that in the trade battle with China, the Fed should be accommodative with its policy. Trump called Beijing a currency manipulator, and said the Euro was being manipulated also. Speaking on Trump’s comments and his new consistency in criticizing the Fed, one analyst said “This is now a serious headwind to the dollar”.


FINSUM: It is true that a constantly strengthening currency is difficult to deal with in a trade war, but that the same time, the Fed’s job is to look at US economic fundamentals. That said, how rate decisions would affect the economy via a trade war do seem like they would be within the Fed’s purview.

Published in Macro
Thursday, 09 August 2018 09:24

Why the Ten-Year Will Face Big Trouble

(Washington)

This has been a week of divergent views on bonds. Earlier this week we ran a story arguing that there would be no bear market in Treasuries. It was a solid argument. However, now there is a contention out there that ten-years, specifically, might struggle. The reason why is that demand at auction has been falling for the bonds just at a time when the US needs to issue more and more to cover its deficit. In addition to excess supply, the other big issue seems to be that short-term Treasuries are yielding so much relative to ten-years, that there is little incentive to buy them.


FINSUM: In one sense this is bad, but in another good. The downside is that holders of ten-years (which are a huge component of fixed income indexes) will be hurt as yields rise. But on the positive side, this is exactly the kind of force that keeps the yield curve from inverting as longer-term yields rise alongside shorter-term ones.

Published in Bonds: Total Market
Tuesday, 07 August 2018 14:27

There is No Bear Market Coming for Treasuries

(New York)

With all of the bearish stories swirling around lately (us included), it was refreshing to find an alternative view today. Bloomberg has put out an argument that there will be no bear market in store for Treasuries. The story is from the top ranked bond strategist in the world, who points out that a decline in structured credit and related products means that Treasuries are a much higher component of overall fixed income indexes these days. This concentration is likely to keep rising over the next decade, which means indexes and benchmarks will need to buy Treasuries, a critical factor which will keep demand high. Another important point is that the stock market is losing its appeal compared to short-term Treasuries, as the yield of the latter is way ahead of the former and likely to stay that way.


FINSUM: This is excellent analysis from a highly reputably source. Our only addition would be to point out that US and global demography also reinforces the key points, as the aging of the world means there will be a higher demand for income investments over the next decade.

Published in Bonds: Total Market
Monday, 06 August 2018 09:05

JP Morgan Warns Treasuries to Jump to 5%

(New York)

Investors be warned, JP Morgan has just issued an ominous warning—that ten-year Treasury yields will jump to 5%. JP Morgan’s CEO, Jamie Dimon, has long argued that yields would rise to 4%, but now says the figure might be 5%. “I think rates should be 4 percent today … You better be prepared to deal with rates 5 percent or higher - it’s a higher probability than most people think”. Dimon sees a recession on the horizon, but he does admit there may be time for the bull market to continue, saying it could “actually go for 2 or 3 more years”.


FINSUM: Ten-year yields are currently having trouble sustaining 3%, so it is hard to imagine them going to 5% any time soon. Still we thought the warning was worth sharing.

Published in Eq: Total Market
Monday, 06 August 2018 09:01

Yields are Creeping Higher Again

(New York)

They had been paused for a couple of months, but in the last week, things started to change. Treasury yields once again broke above the 3% barrier last Wednesday. The number is a psychologically important and has proved a stalwart level for the yield to breakthrough. It did so earlier this year, before quickly falling back into the 2.8% range. Yields seemed to be pushed higher by a sharp rise in Japanese bonds yields following action by the BOJ.


FINSUM: Treasury yields are hard to handle right now. On the one hand, the economy looks fantastic, which should send them higher, but at the same time the Fed looks hawkish and the risk of recession seems to be rising, which would keep things in check.

Published in Bonds: Total Market
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