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Why Your Portfolio Needs More Than Just Equities
You know your portfolio needs more than just equities. So what can complement equities in your portfolio? How many high-yield bonds you own depends on your risk appetite.
Will FOMC Keep Tightening Screws on the US Economy?
FOMC members after the latest policy statement have remained biased toward further rate hikes, but markets have questioned the Fed’s hawkishness.
Is the Fed Sure What It’s Doing?
In this series, we’ll analyze Fed members’ comments in June 2017 to better understand their outlooks on the US economy and how they justify their hawkish or dovish stances.
A Softer Rebound Could Move Markets in the 2Q
A softer rebound could move markets in the second quarter. If the economy remains weak in the second quarter, the Fed has some leeway to maneuver the rate.
Bank of Japan Maintained the Status Quo: Is QE Working for Japan?
The Bank of Japan (or BoJ) maintained the status quo in its recent monetary policy review meeting on April 28, 2016.
How Saudi Arabia’s Bond Sale Affects US Treasury Bonds
Saudi Arabia has also been involved in the sale of US Treasuries. The country is the 15th-largest holder of US Treasury bonds in the world.
What Could Keep Treasury Yields Low?
Low yields abroad could keep Treasury yields low. The ten-year US Treasury is currently yielding ~2.4%—compared to 0.9% of the German bund.
How Recent Economic Data Affected Bond Markets
In the recent weeks, the performance of the US bond markets (BND) has been influenced by trade conflicts between the US and other nations.
Why Have Treasury Yields Risen?
The US Treasury (TLT)(GOVT) yields have been driven mainly by the Greek debt fiasco and central bank actions. Yields started falling early this year.
Gold versus 10-Year Treasury Bonds
The negative interest policy of the central banks is casting government bonds as a futile choice for investors compared to stocks and gold. As a result, bond prices dipped and yields started rising.
Investors Beware: Duration Risk Has Risen across the Bond Market
If you’re a bond (BSV) (AGG) investor or fund manager, fluctuation in interest rates is one of the key risk drivers for the returns you get from your portfolio.
Assessing demand fundamentals for the latest T-bond auctions
The 30-year T-Bond auction was a reopening of May’s 30-year bond issue. The underlying 30-year T-Bond was auctioned on May 8 at a coupon of 3.375% to mature on May 15, 2044.
Could This Week’s Fed Meeting Boost Gold and Bonds?
The Fed is scheduled to meet this week. With the S&P 500 at record highs, could the Fed play spoilsport at this week’s meeting?
Ray Dalio’s Take on China
Ray Dalio discussed his take on the slowdown in China and how it could impact worldwide growth at the World Economic Forum in Switzerland.
President Trump Criticized the Fed, Impacted Financial Assets
In an interview with Reuters on August 20, President Trump mentioned that he was “not thrilled” with the Federal Reserve for raising rates.
What to Make of the Rebound of the Credit Index in May
The Leading Credit Index expanded for the first time in four months in May with a reading of -0.86.
One Way China Could Twist Trump’s Arm
There is one economic measure at China’s dispense that could force the Trump administration to back away from its aggressive trade policy.
How the US-China Trade Deal Could Hurt Global Markets
China invests the trade surplus it has with its trading partners in US government securities (GOVT).
Should We Worry about the Contracting Credit Index?
The Conference Board uses credit conditions in the economy as one of the components of the leading economic index (or LEI) economic model.
US Yields Peak and Gold Slumps. Are the Dots Connecting?
US ten-year Treasury note yields (IEF) hit a high mark of approximately 3.1% today—a record since July 2011.
Global Fund Managers Think These Trades Are the ‘Most Crowded’
The frequency of an asset class making financial headlines is indicative of investor interest.
Why Bond Yields Rose on Tuesday
The April retail sales report was released on May 15, and the surprise reaction to this report was an increase in bond (BND) yields across the board.
What to Make of a Contracting Leading Credit Index
In March, the Leading Credit Index recorded a reading of -0.46, declining, compared to the February reading of -0.79.
Fed Member Mester Says Flat Yield Curve Is Not a Sign of Weakness
Fed member Loretta Mester has sided with Fed Chair Jerome Powell that a flattening yield curve doesn’t signal a weakness.
Why the Markets Are Worried about the Yield Curve
The spread, or the difference between the ten-year and two-year US Treasury bonds, has fallen below 50 bps for the first time since 2007.
An Economic Arrow in China’s Quiver
China owns close to 20% of the total outstanding US debt, and the total value of these securities is close to $1.2 trillion.
Is It Time for Fiscal Expansion?
An economy records a budget deficit when its annual revenue generated is lower than its expenditure.
What the Lending Credit Index in January Tells Us Now
The Conference Board uses credit conditions in the economy as one of the key constituents in its LEI (Leading Economic Index).
Will the US Government Be Able to Borrow Effortlessly?
US government securities (GOVT) are considered to be risk-free with minimal credit risk. There shouldn’t be any problems with raising more capital—at least on paper, and for the time being.
Double Whammy: Rate Hikes and Balance Sheet Trimming
The US Federal Reserve has accumulated huge quantities of fixed-income (BND) securities as part of its three quantitative easing programs, QEs 1, 2, and 3.
Why US Treasury Borrowing Could Rise Substantially
The US Treasury manages the US government’s payments, and whenever there’s a shortfall in meeting expenses, the Treasury borrows and pays interest.
Why the US Economy Could See a Higher Deficit
A government budget deficit occurs when an economy’s annual revenue is less than its total expenditure.
Why Buffett Says Low-Yielding Bonds Are a Dumb Investment
In this annual letter to shareholders, Buffett explained a bet between him and his counterpart, Protege Partners, to fund a charity, Girls Inc. of Omaha.
Have We Missed a Greater Threat in the Recent Market Turmoil?
The recent market turmoil that shook investors’ confidence has settled for the time being, but…
Understanding Warren Buffett’s Warning to Bond Market Investors
In his latest shareholder letter, dated February 24, legendary investor Warren Buffett shared his views on financial markets.
How the FOMC Views the US Financial Situation
The FOMC staff review indicated that the US investor sentiment has improved in the inter-meeting period.
Changes to the Balance Sheet Unwinding Program
According to the latest communication from the Fed, the pace of the balance sheet unwinding program has been increased to $20 billion per month.
Is the Leading Credit Index Signaling Any Business Cycle Changes?
This constituent of the LEI is an economic model, constructed by modeling changes in six financial market instruments.
What’s the Economic Impact of the US Government Shutdown?
The latest US government shutdown only lasted for three days and is unlikely to have a major impact on the US economy.
What Could Happen if the US Debt Ceiling Isn’t Raised
The failure of US Congress to raise the debt ceiling would result in a partial government shutdown. The US Treasury wouldn’t be able to issue any government debt, and it could end up borrowing from its retirement savings fund.
Why Is US Debt So High?
Most countries tend to issue debt to fund their deficits and keep paying interest on these borrowings. These revenues are generated through taxes from companies and individuals.
Your Guide to the US Debt Ceiling
The current debt ceiling is likely to be breached on January 19, and once that happens, the US Treasury must stop issuing any new debt (SHY).
What Could Happen If China Wants Its Money Back?
If the Chinese government decides to sell its US debt (GOVT) holdings, it could lead to another possible global financial crisis.
Why Is China the Largest Holder of US Debt?
The process of China buying US debt is beneficial for both the United States and China.
Which Countries Hold the Most US Debt?
The United States holds the largest trade deficit in the world. The United States has had a trade deficit for more than four decades and continues to increase the deficit every year.
The US Bond Market and the Big Scare from China
On January 10, 2018, Bloomberg News broke a story that the Chinese government could be planning to slow down its purchases of US government debt (GOVT).
How the Leading Credit Index Tracks US Credit Conditions
Understanding the Leading Credit Index The Conference Board LCI (Leading Credit Index), a constituent in the LEI (Leading Economic Index), is published every month and tracks credit conditions in the US economy by following changes in six financial market instruments: the two-year swap (SHY) spread (real time) the three-month LIBOR[1.Intercontinental Exchange London Interbank Offered Rate] (SCHO) […]
A Double Dose of Tightening from the Fed in 2017
In its December monetary policy statement, the Fed projected three interest rate hikes in 2018 and three in 2019, depending on the incoming economic data.
Assessing the Risk of a Flattening Yield Curve
St. Louis Fed president and CEO James Bullard gave a presentation at a regional economic briefing on December 1. Throughout this series, we’ll analyze Bullard’s take on the risks of an inverted yield curve.
The Leading Credit Index: October Update
The Leading Credit Index for October was reported to be -0.70, improving from the revised September reading of -0.64.
The FOMC’s Latest Review of the Financial Situation
The FOMC staff review indicated that domestic financial asset prices between meetings reacted to lower accommodation from the US Federal Reserve.
Key FOMC Insights and the New Fed Chair
The US FOMC left rates unchanged after the November 2017 meeting, as expected, setting the stage for a potential rate hike in December.
Understanding the Leading Credit Index for September 2017
The Leading Credit Index is an economic model that’s modeled on the performance of six major financial market instruments.
A Look at the Possible Effects of Balance Sheet Unwinding
The US Fed has amassed a huge number of fixed income (BND) securities as part of its quantitative easing (or QE) programs 1, 2, and 3.
Inside the September FOMC Meeting: Key Points
In this series, we’ll discuss the September FOMC meeting minutes in detail and decide how the meeting minutes have changed the outlook for markets.
ADP Jobs Data Dragged Lower by Hurricanes in September
As per the September ADP National Employment Report, the US private sector added 135,000 jobs during the month. The figure is a sharp decrease from 228,000 in August.
Why FOMC’s John Williams Sees No Impact of Balance Sheet Unwinding on Markets
In the long run, Williams said it would be difficult to predict how markets would react to the Fed’s balance sheet unwinding program.
Reading the FOMC’s Changing Tone
Since the September 20 statement, markets have turned skeptical about whether the Fed will be able to go ahead with its December rate hike plan.
Are Investors Not Worried about Risk Anymore?
Throughout this series, we’ll look at potential risks facing markets, and how they could impact global financial markets in the short-to-medium term if they end up materializing.
Understanding the Leading Credit Index
Understanding the Leading Credit Index The Conference Board LCI (Leading Credit Index), a constituent of the LEI (Leading Economic Index), is constructed based on the performance of six financial market instruments. These components track lending conditions in the US economy. Performance of the LCI Improving credit conditions are considered positive for the economy. When the LCI […]
Assessing the US Dollar’s Rally after the Latest Hawkish Fed Statement
The US dollar rallied after the latest FOMC (Federal Open Market Committee) meeting statement was released on September 20.
More Temporary Relief from North Korea Tensions?
This week volatility (VXX) has continued to stick to its trend of sudden spikes and then dropping immediately.
Why the US Debt Ceiling Fight Has Been Postponed
The key reason for the debt ceiling deal was to approve aid to Hurricane Harvey victims. A US government shutdown could have adversely impacted relief operations.
The US Debt Crisis and the Specter of a Government Shutdown
Although the latest date that the US debt ceiling can be raised is September 29, there is usually a two-week extension to allow both sides to come to an agreement.
Why North Korea Tensions Matter to the Market in September
Risk aversion is likely to weigh on riskier assets like equities (QQQ) and cause bond spreads to widen.
How Bond Markets Reacted to North Korea’s Missile Launch
US bond markets were the center of attention last week as central bankers’ comments at Jackson Hole could have induced volatility in the bond markets.
North Korea Tensions: Will Demand for Safe Havens Rise?
In the financial markets, there are a few financial assets whose demand increases dramatically in times of uncertainty.
What Financial Markets Predict for the US Economy
Understanding the Leading Credit Index The Conference Board Leading Credit Index (or LCI), which tracks lending conditions in the economy, is reported monthly. The index has six constituents: 2-Year Swap Spread (SHY) (real time) LIBOR[1.London Interbank Offered Rate] 3-month (SCHO) less 3-month Treasury-bill (VGSH) yield spread (real time) debit balances in margin accounts at broker dealers […]
Why Bond Markets Can’t Rally Aggressively This Week
US bond markets (BND) remained volatile (VXX) in the week ending August 25. Investors reacted to US political developments and Yellen’s speech.
Why the US Government Has Been Shut Down Before
A failure to raise the debt ceiling will likely result in a US government shutdown and a default by the US, which would be catastrophic for the global economy and financial markets (VTI) (USMV).
Here Are the Short-Term Risks to the Bond Markets
The key risk faced by bond markets is a sudden fall in prices.
Will the US Dollar Turn Around after Jackson Hole Symposium?
The US Dollar Index (UUP) managed to recover some of the losses it saw in the last few weeks.
Why Bond Yields Remained Unchanged Last Week
The US bond markets (BND) turned volatile (VXX) in the week ending August 18 but remained close to their August 11 close.
Do Financial Markets Have Another Tense Week Ahead?
Equity markets in the US and across the globe reported heavy losses as risk aversion set in.
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.
Will Bond Yields Continue to Fall amid Geopolitical Tensions?
Bonds, especially U.S. Treasuries (GOVT), are considered one of the safest assets in which to park your funds in times of uncertainty.
How Are Safe Havens Faring in This North Korea Fear?
The safe havens that benefit the most in times of uncertainty include gold (GLD) and U.S. Treasuries (GOVT).
Inflation Data’s Impact on the Bond Markets
FOMC members Neel Kashkari, William Dudley, and Robert Kaplan are scheduled to speak this week.
Will the Bond Market Revival Continue This Week?
US bond markets (BND) continued to recover with fewer chances for another rate hike from the US Fed this year.
Why Bond Prices Rose after the FOMC’s Statement
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.
Could the Fed Derail the Bond Rally?
Bond markets continue to rally The US bond market (BND) continued its impressive rally last week. The possibility of a slower pace of rate hikes from the US Fed boosted bond market sentiment. Bond yields across the curve fell. The ten-year yield (IEF) closed at 2.2%, with a fall of 95 basis points. The two-year […]
Will the US Balance Sheet Unwind Affect the Markets?
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.
Why We Need to Track Consumer Expectations
The University of Michigan Consumer Sentiment Index is a measure of consumer expectations for future economic conditions. The index is prepared based on two different surveys.
What the Conference Board LEI Tells Us about the Market
The Leading Credit Index is one of the constituents of The Conference Board Leading Economic Index (or LEI), which is reported by The Conference Board on a monthly basis.
Why the Yield Curve’s Flattening Doesn’t Indicate a Recession
In recent months, there’s been a lot of chatter about the flattening of the yield curve. The yield curve is constructed by plotting the yields of different maturities.
Why Did Bond Yields Drop after Yellen’s Latest Testimony?
Bond yields were all over the place during US Federal Reserve Chair Janet Yellen’s testimony to the Congress.
Why the Possibility of Delayed Rate Hikes Boosted Bond Markets
Bond markets (BND) rebounded sharply after disappointing data on June retail sales and inflation (TIP).
Will Market Shocks Really Be Minimal to Balance Sheet Unwinding?
In its June policy meeting, the Fed has signaled that it will stop replacing maturing securities and slowly reduce the size of its balance sheet.
Why the Bond Markets Survived Stellar Jobs Numbers
The bond markets (BND) have survived better-than-expected US payroll additions last week. The US economy added 222,000 jobs in June 2017 amid broad-based gains.
Why FOMC Members Were Divided about Balance Sheet Shrinking
The FOMC June meeting minutes that were released on July 5, 2017, indicated that the FOMC members were divided over when to begin shrinking the Fed’s bloated balance sheet.
Why Central Bankers Are Ruling the Bond Markets
In terms of Treasury auctions, the three-year, ten-year, and 30-year (TLT) bonds worth $56 billion are scheduled to be offered this week.
Why the US Dollar Keeps Trending Lower
The US Dollar Index (UUP) sank below the 96.0 mark on Tuesday, marking the continued depreciation of the US dollar against other major currencies.
Dallas’s Kaplan Discusses the Biggest Headwind for the US Economy
Dallas’s Federal Reserve president, Robert S. Kaplan, said that the rebound in the US economy is likely to continue for the rest of 2017.
Why NY’s Fed President Doesn’t Feel a Flattening Yield Curve Is Negative
New York’s Federal Reserve president, William C. Dudley, recently spoke at a business forum in New York and said that he was pleased with the current state of the US economy.
Why Bond Traders Continue to Be Confused
US Treasuries (GOVT) had another roller coaster ride this week due in part to the conflicting views from Fed members and weaker-than-expected economic data.
What Does Rise in US Interest Rates Mean for Bond Markets?
US Treasuries (GOVT) had a mixed response to the FOMC statement and the Fed’s interest rate hike.
What Narrowing Yield Spreads of US Treasuries Could Indicate
The US ten-year yield fell to 2.1% after the weak US data report, US inflation showed a decline of 0.1%, and retail sales fell by 0.3% for May 2017.
Fed Chair Yellen Warns about Its $4.5 Trillion Balance Sheet Unwinding
In her post-meeting press conference, Janet Yellen warned that the Fed could implement its balance sheet unwinding process soon if the economy continues to perform as expected.
Could an FOMC Rate Hike Drive Bond Yields Higher?
Bond yields of U.S. Treasuries managed to recover from the losses of the previous week. Demand for US bonds receded.
Why Loretta Mester Is Worried about Falling behind the Curve
Loretta J. Mester, president of the Federal Reserve Bank of Cleveland, said she doesn’t want the Fed to fall behind the curve.
