How Concerned Is The Fed With The Yield Curve?
After another week of yield curve flattening, we now have the 2s-10s curve in US Treasuries at just 43 basis points.
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US
The Fed and The Treasury Will Also Drive The Yield Curve Shape
Having written recently about our thoughts on how the yield curve might flatten, we should also note that whilst this, our base case scenario, is happening at the moment, there are a number of other potential strong influences that we need to monitor as they have the ability to prolong this flattening.
Other Recessionary Indicators
Having discussed the shape of the yield curve as a recessionary indicator already last week, we would like to elaborate on what other indicators we look at as fixed income investors to determine where we are in the economic cycle, which in turn determines how we position ourselves on the yield curve and whether we look to credit risks or government bond risks.
Yield Curve Shape and Recessions
The rapidly flattening US Treasury yield curve is prompting a lot of questions about the shape of the curve and it being a good predictor of upcoming recession.
Q2 Could Be The Best For Risk in 2018
As we now are well into the Q1 earnings season we have been debating how the current quarter could well be the best for risk in 2018.
It’s Still All About The Fed
A lot has been packed into a short week but, despite all the political posturing and rhetoric surrounding trade tariffs, it is still central bank policy that ultimately drives market sentiment and this week we have seen key inputs from leading players at the most important central bank of all, the US Federal Reserve, that have been somewhat overshadowed by more sensationalist news from the political arena.
Comparing Yields in Different Currencies
Fixed income managers always want to have the flexibility to find the best value across their investment sphere and therefore need the capacity to buy bonds in different currencies.
Roll Down explained
Several times this year we have discussed the benefits of “roll down” in an environment that for fixed income investing is particularly unfriendly. We believe roll down gains will be one of the best ways to protect portfolios in 2018 from the rising rate curves that we have been experiencing so far.
Surprise or Shock to the System
One of the most important considerations for us as bond investors is determining where we are in the economic cycle.
Make Way For Supply
Today marks the start of a very busy week for participants in the US Treasury market.
6 Reasons Government Bonds Yields To Rise Further
Our base case for rates markets is a gradual shift higher, but there are reasons to consider why even our forecast is too constructive and the move higher could be more substantial.
All change for the markets, or maybe not
Following Monday’s volatility in the rates market and the subsequent “meltdown” in US equities, which saw the Dow Jones falling by more than 1,500 points intraday; yesterday had a more orderly feel to markets, and ultimately the 3 major indices in the US, the Dow Jones, S&P 500 and Nasdaq, are all still in positive territory for the year to date.