The share of primary dealer bids fell from 61.5% to 56.9% in the week. A fall in the percentage of primary dealer bids is a sign of stronger fundamental market demand.
Despite unchanged issuance, demand for the securities was weak. The bid-to-cover ratio fell 4.2% to 3.4x month-over-month.
Consumer sentiment as measured by Thomson Reuters and University of Michigan’s report rose to 93.8 based on a preliminary reading for December 2014.
By 2009, the budget deficit had run up to nearly 10% of the GDP. Yet for fiscal 2015, the Congressional Budget Office expects the deficit to shrink to 2.6%
Excluding motor vehicles and parts, retail sales rose 0.5% from October. Retail sales in the 11 months to November are up 4% over the same period in 2013.
The bid-to-cover ratio is an important demand indicator. It’s the total value of bids received divided by the value of securities on offer.
Market demand for the securities rose sharply to 74.1% of the competitive accepted bids—compared to 57.6% at November’s auction.
Market demand for the ten-year note was strong in December—the highest since March 2013. This was primarily due to higher indirect bids.
The demand for long-term Treasuries has gone up, while personal consumption expenditures—a measure of inflation—have stayed below policymakers’ 2% target.
In the new fixed income landscape, you can find yield in high-yield bonds. These bonds have the highest chances of defaulting. As a result, they trade at a discount.
The asset correlation matrix proves that Treasuries are great diversifiers. It shows the correlation coefficient between Treasuries, developed markets, and emerging market stocks.
Ultra-low yields mean holding Treasuries could be risky. Most developed markets (EFA) are seeing low Treasury yields. Japan (EWJ) and Germany (EWG) are seeing ten-year Treasury rates below 1%.
Low yields forced investors to look for higher yields elsewhere. Ten-year US Treasuries have just about compensated investors for inflation over the last few years.
Negative real rates boosted the economy. The real interest rate is the nominal interest rate minus the inflation rate. Currently, real interest rates are in the negative territory.
Having received a referendum from the people regarding his policies, or lack of a capable opposition, Shinzō Abe now has to convince the markets that he’s going to make difficult decisions quickly.
Japan’s exports are vital to its economic well-being. The nation has been export-focused and has become a leader in electronics, passenger vehicle, and other product exports.
The Bank of Japan (or BoJ) has twice taken major steps to spur growth during Shinzō Abe’s second term as prime minister.
In calling for a snap election, Shinzō Abe deferred the second hike in taxes from 8% to 10% by 18 months. This may not be a policy failure, but it certainly hints that the government will need to do more to help the economy find its legs.
Unlike inflation, deflation doesn’t raise eyebrows because it happens much more slowly. But by the time you realizes the vicelike grip of deflation, it’s already too late.
Abenomics, named after Shinzō Abe, is an attempt by the government to get Japan moving again. The policy aims to get Japan back on track by undertaking monetary, fiscal, and structural reforms.