Post Tagged with: "government bonds"

What will policy normalization mean for credit markets (wonkish)

What will policy normalization mean for credit markets (wonkish)

Given recent hawkish Fed statements and the potential for even more than three hikes, all of this is bullish for longer-duration Treasuries but much less so for auto ABS, high yield and emerging markets.

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Why the March 2017 jobs report won’t change the Fed’s strategy

Why the March 2017 jobs report won’t change the Fed’s strategy

The 98,000 jobs added to payrolls in the US in March were well below the consensus estimate of 178,000, especially when you consider downward revisions to January and February totalled 38,000. I don’t believe this matters for the Fed though; policy tightening will continue apace.

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How jobless claims tick up before a recession hits

How jobless claims tick up before a recession hits

I am going to start commenting on the weekly jobless claims figure more actively because I like it as a real-time indicator. For me, it is the best real-time data point we have on how the employment picture intersects with consumption demand and GDP because it is released every week.

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Hedging against rising global political uncertainty

Hedging against rising global political uncertainty

Starting in 2007, global markets were buffeted by a series of financial and economic crises that created the greatest deflationary scare since the Great Depression. We have left out-and-out crisis mode. But the challenges are still considerable, especially politically.

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Why the US Treasury should issue zero coupon consols

Imagine you could issue 30- or 50-year paper today at 3 or 4%. And you have a strong suspicion that – in the future – 2-year paper won’t be 1.15% like it is today. You think it could be 4, 5 or 6%. Why not lock in the long-term rates of today and not have to roll over that debt for 30 or 50 years? Wouldn’t you save a shed load of money for the US government?

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Why the Trump Administration’s calls for lengthening bond maturity make no sense

Why the Trump Administration’s calls for lengthening bond maturity make no sense

The problem with the Trump administration’s talk about lengthening the maturity of debt issuance is that it confuses the future path of interest rates with the steepness of the yield curve. They talk about locking in low rates. And what they mean is locking in low nominal rates today for fear that interest rates will rise in the future. But what you want to do is issue bonds at the lowest possible rate that you can while still supplying the market with the liquidity — the slug of safe assets — it needs to function properly.

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If foreigners are dumping Treasuries, how should you respond as an investor?

If foreigners are dumping Treasuries, how should you respond as an investor?

One of the lead stories at Bloomberg this morning is an article about foreigners shying away from “financing the US government”. And the conclusion of this article is that it could mean higher interest rates in the US. Is this conclusion the right one though, and how should you respond as an investor? I have some thoughts on that below.

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Why should the Trump Administration issue 50-year bonds?

As the Trump economic team comes together, their economic vision is also coming together. In the last post, I laid out some overarching themes I am seeing from them on the hopes that reducing taxes and regulation will increase productive capital formation and long-term economic growth. You can put all of these ideas under the moniker of supply-side economics. I am also seeing a few individual ideas I wouldn’t put under that umbrella including the extension of the maturities of government bond issuance. Here are some thoughts on that issue.

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The dollar bull market will eventually break something

The dollar bull market will eventually break something

With the fed having raised interest rates for the second time in ten years, in an environment in which US growth looks pretty good, we should expect more hikes to come. The question is whether the economy can withstand the hikes and what they would mean for markets. I have five asset classes to watch: Treasuries, the US Dollar, Emerging Markets, the Japanese Yen, and Gold.

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A short squeeze in government bonds?

A short squeeze in government bonds?

This summer – when stock markets across the globe began to rally after their post-Brexit collapse, bond markets put in a top. US 10-year yields bottomed at 1.35% on July 8th. And in the time since, they have zoomed to over 2.5%. In short, while stock markets have rewarded investors, bond investors have taken a beating. What’s happening here?

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UK fiscal and monetary policy offset to kick in, bullish for gilts

UK fiscal and monetary policy offset to kick in, bullish for gilts

UK Chancellor Osborne has now abandoned his 2020 budget surplus target. Combine this with the dovish statements by Bank of England governor Mark Carney yesterday and you can see some serious policy changes in play to minimize the near-term downside risk. But, of course the risks to the UK are longer-term and the near-term risks are mostly elsewhere in the global economy. I continue to believe this favours safe assets i.e. government bonds.

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Despite the Fed’s rate rise, the convergence to zero continues unabated

Despite the Fed’s rate rise, the convergence to zero continues unabated

Back in January, I said that as far as bond markets go, the convergence to zero would be a dominant issue as the deflationary macro environment made it difficult to raise interest rates. The US is trying to buck this trend, but in doing so, it is creating the kind of volatility, due to Chinese currency devaluation, that will make […]

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