Archives of “Yield” tag
rss30 year yield falls to a new all time low
The headline of the day is that the 30 year yield traded to a new all time low of 1.8843%. That took out the August 2019 low yield of 1.9039% and although the yield is closing above that old low, the closing level will be the lowest on record.
Helping the yields move lower is the:
- Expectation of a cut in US rates by July and potential for another cut later in the year
- Flight to safety flows
- Lower global growth from the coronavirus
- Dollar buying as the US remains a safe haven
- The Markit Service and Composite PMI data was below the 50.0 level while the manufacturing index was lower than expectations as well.
The bond market isn’t feeling too upbeat on trade talks
Treasury yields fall across the curve to session lows
US auctions off 30 year bond at 2.170% vs WI level of 2.169%
US auctions off $16 billion of 30 year bonds
- High yield 2.17% versus WI of 2.169%
- Bid to cover 2.25x vs six-month average of 2.23x
- Dealers took 22.94%. vs six-month average of 27.3%
- Directs 18.5% vs six-month average of 18.8%
- Indirects 58.5% vs six-month average of 67.2%
US stocks mixed as attention turns to Fed
US stocks were mixed as Federal Reserve officials cast doubts on further rate cuts and a reading on domestic manufacturing stoked concerns over the health of the economy. The S&P 500 ticked 0.1 per cent lower after drifting between gains and losses, with investors turning their attention to the central bank’s annual summit where chairman Jay Powell will speak on Friday. The Nasdaq Composite was down 0.4 per cent, while the Dow Jones Industrial Average rose 0.2 per cent on a rally in shares of Boeing. Central bankers from around the world have descended on Jackson Hole, Wyoming, for a policy symposium that is closely watched by investors seeking clues on monetary policy.
Market participants are looking for the Fed to follow its July rate cut with another one in September, but at the start of the Jackson Hole gathering on Thursday, Philadelphia Fed president Patrick Harker and Kansas City Fed president Esther George indicated in television interviews that they would not back further cuts. “My sense was we’ve added accommodation, and it wasn’t required in my view,” Ms George, one of two dissenters in the July decision, told CNBC. Mr Harker, who is not a voting member of the Fed’s policy setting committee, said he believes the federal funds rate is around its neutral level, adding: “I think we should stay here for a while and see how things play out.” The US 10- and two-year yield curve inverted for the second time this week following the remarks. The yield on the benchmark 10-year Treasury rose 3.3 basis points to 1.6097 per cent, while the policy-sensitive two-year yield was up 4.5bp at 1.6141 per cent. An inverted yield curve is considered a sign that investors expect a recession.
Biggest Bubble Ever? 2017 Recapped In 15 Bullet Points
Here are his 15 bullet points that show why in 2017 we may have seen the biggest bubble ever (and why we can’t wait to see what 2018 reveals).
- Da Vinci’s “Salvator Mundi” sold for staggering record $450mn
- Bitcoin soared 677% from $952 to $7890
- BoJ and ECB were bull catalysts, buying $2.0tn of financial assets
- Number of global interest rate cuts since Lehman hit: 702
- Global debt rose to a record $226tn, record 324% of global GDP
- US corporates issued record $1.75tn of bonds
- Yield of European HY bonds fell below yield of US Treasuries
- Argentina (8 debt defaults in past 200 years) issued 100-year bond
- Global stock market cap jumped1 $15.5tn to $85.6tn, record 113% of GDP
- S&P500 volatility sank to 50-year low; US Treasury volatility to 30-year low
- Market cap of FAANG+BAT grew $1.5tn, more than entire German market cap
- 7855 ETFs accounted for 70% of global daily equity volume
- The first AI/robot-managed ETF was launched (it’s underperforming)
- Big performance winners: ACWI, EM equities, China, Tech, European HY, euro
- Big performance losers: US$, Russia, Telecoms, UST 2-year, Turkish lira
As Hartnett summarizes, “2017 was a perfect encapsulation of an 8-year QE-led bull market”
- Positioning was too bearish for either a bear market or a correction in risk assets.
- Profits were higher than expected (global EPS jumped 13.4%) this time thanks to a synchronized global PMI recovery.
- Policy was aggressively easy, as the ECB and BoJ bought a massive $2.0tn of financial assets; fiscal policy also easy (e.g., US federal deficit up $81bn to $666bn).
- Returns were abnormally high in 2017 (Table 3); corporate bonds and equities soared, but the biggest surprise was stubbornly low government bond yields: thematic leadership of scarce “growth” (e.g. tech stocks), “yield” (e.g., HY, EM and peripheral EU bonds) and “volatility” once again remained the core of the bull.