Displaying items by tag: yields

(New York)

Alongside rising rates and yields, accelerating dividends are a nice feature to have right now. The S&P 500’s dividend growth over the last five years has averaged 13.4%. However, every stock on this list has seen growth north of 20%. The five stocks, which come from quite varied sectors, includes UnitedHealth Group, AO Smith, Zoetis, Mastercard, and Nvidia.

FINSUM: The only catch for this group is that dividend yields, on average, are low, with UnitedHealth Group having the highest at 1.4%, well behind the average S&P 500 yield. The advantage, however, is that a stock with strongly rising dividends is more likely to see capital appreciation.

(New York)

US Treasury bonds got walloped yesterday. Yields on the ten-year fell over 10 basis points following weeks of relative calm. The big move happened in the early afternoon yesterday, and sent ETFs sharply lower. The jump in yields was not contained to the 10-year either, as 20-years and 2-years rose as well. The big question is why the sharp move occurred. Analysts are saying it was actually overseas influences that drove the losses. In particular, the Bank of Japan announced a policy change that would send rates higher, which spilled over to the US. Further, some better news on the trade war front might have sent some money out of Treasuries after a flight to quality in previous weeks.

FINSUM: This is a really sharp move for it to have been from overseas alone, as these kind of big jumps usually move in reverse. It is hard to draw any conclusions, but it may indicate there are bigger losses to come.

(Johannesburg)

Emerging markets had a very poor first half to the year, with equities entering into a bear market and bonds suffering losses too. However, in recent weeks, bonds have started to rally, which has made some hopeful a big rebound is on the way. That said, American fund managers are not rushing back in, saying that the bonds are very risky. In fact, a survey by Citi found that even though prices are rising, top EM bond fund managers are getting bearish and are setting aside more cash in anticipation of losses.

FINSUM: Dollar-denominated bonds from the likes of Argentina, Egypt, and Brazil have their appeal—high yields, but they do hold a lot of risk, especially in a period of rising rates and a rising Dollar.

(New York)

The rise in yields across the world has seemed to stall over the last couple of months. Ten-year Treasuries are back under 2.9%, and while the yield curve is flattening, the risk of big losses from rising long-term yields seems to be mitigated. Not so fast. The Wall Street Journal is reporting that many of the world’s central banks are now aligning themselves with the Fed and are preparing to begin lifting rates. The pattern is emerging across both the developed and emerging markets (e.g. the Bank of England and the Reserve Bank of India).

FINSUM: We think this could be a risk for US investors. The main reason why being that one of the things that has kept long-term yields low is demand from overseas investors for our relatively higher-yielding bonds. If that changes, there won’t be such a lid on Treasuries.

(Washington)

In a highly unusual break from presidential tradition, President Trump weighed in yesterday on the Fed’s current policy approach, and he was not happy. Speaking in regard to recent rate hikes and plans to continue doing so, Trump said “I’m not thrilled … Because we go up and every time you go up they want to raise rates again ... I am not happy about it. But at the same time I’m letting them do what they feel is best.” Speaking plainly, Trump continued “I’m just saying the same thing that I would have said as a private citizen … So somebody would say, ‘Oh, maybe you shouldn’t say that as president. I couldn’t care less what they say, because my views haven’t changed. I don’t like all of this work that we’re putting into the economy and then I see rates going up”.

FINSUM: The media is trying to make a very big deal out of this, but in our view, these are pretty benign comments, especially coming from Trump.