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This week’s key releases
One of the most important highlights this week, February 17–21, for bond markets will be the Treasury International Capital data release that tracks the inflow and outflow of funds from the United States. This is relevant because the onset of the Fed’s tapering program, combined with weakness in domestic economies, has precipitated flight-to-safety flows to U.S. debt markets—particularly Treasuries.
There has been almost $30 billion in outflows from emerging markets year-to-date, which is almost equal to the entire outflow in 2013. A lot of this has been channeled into the U.S. debt market, buoying up the prices of U.S. debt securities. This has caused the debt markets to rally despite the Fed curtailing its open market purchases of Treasuries and agency-backed securities, which was actually expected to reduce bond prices. Instead, bond prices have rallied.
The Vanguard Total Bond Market ETF (BND) has rallied almost 1.5% since the start of the year (to February 14). Of the ETF’s assets, 86.81% are allocated to U.S. bonds—both Treasuries and corporate bonds, including AT&T (T), Verizon (VZ), and Bank of America (BAC).
Other important releases this week include the following.
These releases are expected to provide guidance on economic headwinds.
Severely cold weather has impacted almost all industry segments, and this trend may continue this week—particularly in relation to January’s readings.
To find out if the safe-haven flows to the U.S. debt market are expected to continue, move on to Part 2 of this series.
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