How Rising Geopolitical Tensions Could Affect Bond Yields
US bond markets (BND) rallied in the previous week as tensions between the US and North Korea escalated.
Bonds, especially U.S. Treasuries (GOVT), are considered one of the safest assets in which to park your funds in times of uncertainty.
Greenspan cites rapid inflation growth as the reason for a bond market collapse. But the markets and Fed officials think otherwise.
Fundamentally, bonds (AGG) are a discount instrument and are generally never expected to be in a bubble. Let’s see why that’s the case.
In his interview on the Bloomberg channel on July 31, 2017, former Fed chair Alan Greenspan rang alarm bells about the bond market (BND) being in a bubble.
Alan Greenspan believes that interest rates in the United States and globally are too low and might have to be increased too quickly in the future.
FOMC members Neel Kashkari, William Dudley, and Robert Kaplan are scheduled to speak this week.
US inflation is expected to rise 1.7%, and any positive surprise could propel the US dollar higher by the end of next week.
After falling for two consecutive trading weeks, the US Dollar Index started last week on a stable note but pulled back as the week progressed.
The US Dollar Index fell for three consecutive trading weeks to the lowest levels in 13 months. The US Dollar Index was stable early on July 31.
US bond markets (BND) continued to recover with fewer chances for another rate hike from the US Fed this year.
The US Dollar Index (UUP) continued to slide in the previous week due to the FOMC’s dovish statement and weaker-than-expected economic data.
The VIX Index (VXX) fell to the lowest level ever recorded this week. The VIX Index (UVXY) recorded a lifetime low of 8.84 in the first part of the week.
In its July 23 update to its WEO (World Economic Outlook) report, the IMF (International Monetary Fund) downgraded its US growth forecast. Growth for 2017 has been revised to 2.1%…
This week, the US Dollar Index fell to 13-month low levels after the Fed announced that it would start the balance sheet normalization “relatively soon.”
Most of the statement released by the Federal Open Market Committee (or FOMC) following its two-day monetary policy meeting was in line with the market’s expectations.
US government bonds gained after the FOMC (Federal Open Market Committee) indicated in its July 2017 statement that near-term inflation could remain below its 2% target.
In a statement following the conclusion of its two-day monetary policy meeting, the FOMC stated that US labor market growth was solid.
The Federal Reserve’s view on US inflation was a key driver of the market’s movements after the release of the FOMC’s July meeting statement on July 26, 2017.
After the July FOMC meeting statement was released, market participants came to believe that the Fed would begin the process of balance sheet normalization soon.