The bond market’s roller coaster ride could continue until there’s a clear signal either way on recession

Strategists said it appears the Bank of Japan will buy fewer longer duration bonds in its quantitative easing program, and that could pressure rates higher. But then in the U.S., ISM manufacturing fell to 47.8% in September, its second month of contraction, and the lowest since June 2009. Schumacher said Tuesday was the 22nd day in 2019 with a 10 basis point or more move in the 10-year yield. That was the year of the presidential election, but also the Brexit vote, after which the 10-year yield


Strategists said it appears the Bank of Japan will buy fewer longer duration bonds in its quantitative easing program, and that could pressure rates higher. But then in the U.S., ISM manufacturing fell to 47.8% in September, its second month of contraction, and the lowest since June 2009. Schumacher said Tuesday was the 22nd day in 2019 with a 10 basis point or more move in the 10-year yield. That was the year of the presidential election, but also the Brexit vote, after which the 10-year yield
The bond market’s roller coaster ride could continue until there’s a clear signal either way on recession Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-10-01  Authors: patti domm
Keywords: news, cnbc, companies, rates, ism, theres, roller, investors, 10year, higher, way, recession, continue, clear, moves, signal, ride, rate, yields, coaster, yield, markets, manufacturing


The bond market's roller coaster ride could continue until there's a clear signal either way on recession

It’s usually stock investors who feel the thrill of rising stock prices, and despair when there’s a sharp collapse.

But for the past two months, bond investors have been on a similar roller coaster ride, with volatility at multi-year highs. Treasury yields snapped higher early Tuesday, rising with Japanese yields, but then fell sharply as investors feared that a contraction in September’s ISM manufacturing report means the manufacturing sector is heading for recession.

“We’re in a situation where the market is debating whether we’re on the precipice of recession. Some days we get information that seems to say no, and some days we get information that seems to say yes,” said Ralph Axel, Bank of America Merrill Lynch rate strategist. “The difference between those two answers is a very large range for where rates are going to go.”

The 10-year yield Tuesday started the day moving higher, along side the Japanese 10-year and other global bonds, following a weak auction in Japan. Strategists said it appears the Bank of Japan will buy fewer longer duration bonds in its quantitative easing program, and that could pressure rates higher. Yields, or rates, move opposite price. The 10-year Japanese government bond has a negative yield, and it rose by 6.5 basis points to negative 0.16%.

But then in the U.S., ISM manufacturing fell to 47.8% in September, its second month of contraction, and the lowest since June 2009. The fear is that readings will continue under 50, a sign of contraction, and the weakness could spread.

The 10-year moved from a high of 1.755% to a low of 1.647%. During a wild period of volatility this summer, the 10-year got to 1.43% on Sept. 3, but then rebounded to as high as 1.9% on Sept. 13. The whole Treasury curved moved with it.

The movements in the bond market are widely watched on Wall Street, but they are ultimately felt on Main Street. The bench mark 10-year yield affects a variety of business and consumer loans, and as it fell in August and into early September, so did the interest rates on home mortgages.

“We’ve had pretty good moves in the last month,” said Michael Schumacher, director, rates strategy at Wells Fargo. “It’s been possible to make or lose a lot of money in a hurry. For long only investors, it’s been a pretty good year, and they may not want to play much longer.”

Schumacher said Tuesday was the 22nd day in 2019 with a 10 basis point or more move in the 10-year yield. In 2018 and 2017, there were just eight such moves in each year, but in 2016, there were 39 big moves. That was the year of the presidential election, but also the Brexit vote, after which the 10-year yield fell as low as 1.32%.

Wells Fargo expects the 10-year to be at 1.70% at the end of the year, while Bank of America sees a 1.25% 10-year yield.

Other periods of heightened volatility include 2015, when China devalued its currency; 2013 during the taper tantrum, and 2011 during the European debt crisis.

Axel said the market could continue to be gripped by events beyond the economy. “The level of geopolitical risk is very high,” he said, noting such things as the attack on Saudi Arabia’s oil production last month, as well as risk from the trade war.

Both strategists said the impeachment process could bring unforeseen risks for markets, and it could affect such things as the normal workings of Washington, including a budget deal.

“Our basic thesis is rates will be choppy for awhile and gradually move up,” said Schumacher. “These moves of 10 to 15 either way … I don’t think they’ve spooked too many people but they could if they keep going.”

Schumacher said the bond rally after the ISM report was probably over done, but some investors worry weakness in manufacturing could hit the service sector.

“We’re we’re not forecasting a recession. But if you start to see ISM declines, steep declines in these things you really have to consider it,” said Shawn Snyder, head of investment strategy at Citi Personal Wealth Management.

As the Treasury yields swooshed lower, fed fund futures also had a dramatic move, with expectations for an October rate rising from 42% Monday to 62% after the ISM report, according to the CME Fed Watcher.

In recent weeks, the number of positive economic surprises have risen and recession fears have abated, along with expectations for Fed rate cuts.

“Citi’s view heading into this is they’re probably done with rate cuts for the year, due to inflation ticking higher. If you continue to see downside in this manufacturing data, or the services data, then I would expect them to cut again,” said Snyder.


Company: cnbc, Activity: cnbc, Date: 2019-10-01  Authors: patti domm
Keywords: news, cnbc, companies, rates, ism, theres, roller, investors, 10year, higher, way, recession, continue, clear, moves, signal, ride, rate, yields, coaster, yield, markets, manufacturing


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Investors see less gloom, dump winners and buy economically sensitive stocks

Interest rates have been rising for the same reason, and some investors are betting that Treasury yields may have bottomed for now. “You had everyone piling into the software names because they were a great place to hide during the trade war. In August, Treasury yields hit record and multi-year lows, with the the 10-year yield, as low as 1.42% on Sept. 3, was at 1.64% Tuesday. The momentum trade and the defensive trade is unwinding,” said Hogan. The prices have been bottoming for probably two or


Interest rates have been rising for the same reason, and some investors are betting that Treasury yields may have bottomed for now. “You had everyone piling into the software names because they were a great place to hide during the trade war. In August, Treasury yields hit record and multi-year lows, with the the 10-year yield, as low as 1.42% on Sept. 3, was at 1.64% Tuesday. The momentum trade and the defensive trade is unwinding,” said Hogan. The prices have been bottoming for probably two or
Investors see less gloom, dump winners and buy economically sensitive stocks Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-09-10  Authors: patti domm
Keywords: news, cnbc, companies, trade, buy, market, momentum, dump, sensitive, rates, longer, stocks, winners, growth, 10year, yields, treasury, economically, investors, gloom


Investors see less gloom, dump winners and buy economically sensitive stocks

Traders and financial professionals work on the floor of the New York Stock Exchange (NYSE) at the opening bell on August 15, 2019 in New York City.

Sentiment has shifted in part because of signs of improvement in the trade talks between the U.S. and China. Interest rates have been rising for the same reason, and some investors are betting that Treasury yields may have bottomed for now.

The cheapest stocks, those with the lowest price-to-earnings ratios were snapped up, while many of the most expensive companies, or those with the highest price to earnings ratios, were being sold.

There’s a shift underway in the stock market that may be signalling that some investors believe there was way too much pessimism on Wall Street this summer, and the stocks that do better in an improving economy are the ones to buy for now.

“You had everyone piling into the software names because they were a great place to hide during the trade war. Now they are talking about making some strides,” said Christian Fromhertz, CEO of The Tribeca Trade Group.

“Again, people are not optimistic for the most part on them getting anything done, but as headlines come out … there is a mad rush out of the safety areas of the market.”

Art Cashin, director of floor operations at UBS, said the move away from pricier stocks has the may be an asset reallocation trade. “It may be as simple as taking profits on things that move and investing in others, hoping we’d get closer to a trade deal,” he said. “That may be part of what you’re seeing.”

According to a study by CNBC’s Chris Hayes, the 50 stocks in the S&P 500 with the highest forward P/Es, meaning the most expensive, were down an average 0.8% Tuesday afternoon, with 64% trading lower. The 50 stocks in the index with the lowest P/Es, or the relatively cheapest, rose an average 2.3%, and 90% were trading higher Tuesday.

Art Hogan, chief market strategist at National Securities, said a move out of growth into value appears to be tied as well to the idea that for now, interest rates have bottomed. In August, Treasury yields hit record and multi-year lows, with the the 10-year yield, as low as 1.42% on Sept. 3, was at 1.64% Tuesday.

“All the stuff in the middle has started to outperform. The momentum trade and the defensive trade is unwinding,” said Hogan. “It feels like it’s been triggered because yields have bottomed. That low on the U.S. 10-year feels like an overshoot.”

The Treasury market was flashing dire warnings this summer, when the yield curve inverted at the same time there were few signs of hopefulness around the trade talks. An inversion, in this case in the 2-year and 10-year yields, is when the rates on a shorter duration security rises above a longer dated one, in this case the 10-year note. The curve is no longer inverted, but an inversion can be a reliable recession warning.

“With a low growth, weaker economic backdrop, there are two types of names you want to own. One is secular growth, which is less cyclical, like Mastercard or Microsoft,” said Robert Sluymer, technical strategist at Fundstrat. “As soon as rates start to stabilize, the valuations around them can be ratcheted down pretty quickly.”

Traders have been following the action in iShares Edge MSCI USA Momentum Factor MTUM, down for a third day after hitting a high last week. The ETF was off 1.7%, and is down about 3.5% this week alone.

“I think secular growth is still longer term leadership, but there’s a rotation away from a lot of the bond proxies to the cyclical side of the market. A lot of those cyclicals, whether it’s Caterpillar or Eaton, they peaked at the end of 2017 and beginning of 2018,” said Sluymer. “They’ve been declining ever since. The prices have been bottoming for probably two or three months, but those longer term momentum indicators are turning positive. We would recommend trimming bond proxies and adding to cyclicals.”


Company: cnbc, Activity: cnbc, Date: 2019-09-10  Authors: patti domm
Keywords: news, cnbc, companies, trade, buy, market, momentum, dump, sensitive, rates, longer, stocks, winners, growth, 10year, yields, treasury, economically, investors, gloom


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The 10-year yield hasn’t done this in 20 years, and it could be a bullish sign

Call it a bond yield bounce. That action caused a 12% spike in the iShares 20+ Year Treasury Bond ETF (TLT) in August, a move rarely seen in the Treasury market. “Now that some of the artificial buying has pulled back, it should lead to a bounce in interest rates and a sell-off in the bond market,” Maley said. If the Fed cuts as expected, I think the yield curve eventually straightens out,” he said. “And, in my opinion, … the opportunities right now are much more attractive in the stock market


Call it a bond yield bounce. That action caused a 12% spike in the iShares 20+ Year Treasury Bond ETF (TLT) in August, a move rarely seen in the Treasury market. “Now that some of the artificial buying has pulled back, it should lead to a bounce in interest rates and a sell-off in the bond market,” Maley said. If the Fed cuts as expected, I think the yield curve eventually straightens out,” he said. “And, in my opinion, … the opportunities right now are much more attractive in the stock market
The 10-year yield hasn’t done this in 20 years, and it could be a bullish sign Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-09-06  Authors: lizzy gurdus
Keywords: news, cnbc, companies, treasury, think, yields, stock, fed, yield, 10year, market, bond, uschina, maley, sign, bullish


The 10-year yield hasn't done this in 20 years, and it could be a bullish sign

Call it a bond yield bounce.

U.S. Treasury yields turned higher on Thursday following news that U.S.-China trade talks were to resume in October, mirroring a broad-based move up in the stock market. The yield on the U.S. 10-year Treasury rose to 1.57%.

And, lucky for yield-hunters, this positive action “could last for a little while,” says Matt Maley, chief market strategist at Miller Tabak.

“Yields have been going down all year, and there’s been a good reason for that,” he said Thursday on CNBC’s “Trading Nation,” pointing to Wall Street’s concerns around slower growth, U.S.-China trade, Brexit and other geopolitical issues.

Those worries have led to what Maley called “artificial buying” in the bond market, with investors flocking to bond-based mutual funds and other investments in the interest of hedging their existing positions. That action caused a 12% spike in the iShares 20+ Year Treasury Bond ETF (TLT) in August, a move rarely seen in the Treasury market.

“Now that some of the artificial buying has pulled back, it should lead to a bounce in interest rates and a sell-off in the bond market,” Maley said.

That theory is not only supported by the moves in the TLT — which, as of Thursday, was the most overbought it has been since its inception in 2002 — but by bond yields themselves, the strategist said.

Ten-year yields, for example, are “the most oversold they’ve been since 1998,” Maley said.

“These are kind of the streams I think will lead to tradeable moves, not just ones that’ll last for a couple of days,” he said. “I’m not necessarily saying it’s the end of the whole move [and] rates are going to go straight up from here, but I do think it’s one that’ll last for a while.”

Indeed, the 10-year yield did decline slightly on Friday, to 1.553%.

For Mark Tepper, president and CEO of Strategic Wealth Partners, “all the easy money in Treasurys has already been made.”

“As an investor, it’s important to understand that the 30-year yield is pretty much in line with the dividend yield on the S&P 500 right now. So, which would you rather own over the next 10 years?” he asked during an interview on the same segment. “You’re getting the same yield with a growth component if you invest in stocks.”

And if the stock market rally holds and sends the S&P back to its all-time high around 3,025, yields will follow, Tepper said.

“Right now, all eyes are on the Fed. If the Fed cuts as expected, I think the yield curve eventually straightens out,” he said. “And, in my opinion, … the opportunities right now are much more attractive in the stock market.”

The Fed meets Sept. 17-18.

Disclaimer


Company: cnbc, Activity: cnbc, Date: 2019-09-06  Authors: lizzy gurdus
Keywords: news, cnbc, companies, treasury, think, yields, stock, fed, yield, 10year, market, bond, uschina, maley, sign, bullish


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A hedge fund reportedly lost $1 billion in August betting on Argentina’s economy recovering

The 10-year yield hasn’t done this in 20 years, and it could be a… The yield on the U.S. 10-year Treasury hasn’t been this oversold since 1998, and that could mean rates are due for a lift, says Miller Tabak’s Matt Maley. Trading Nationread more


The 10-year yield hasn’t done this in 20 years, and it could be a… The yield on the U.S. 10-year Treasury hasn’t been this oversold since 1998, and that could mean rates are due for a lift, says Miller Tabak’s Matt Maley. Trading Nationread more
A hedge fund reportedly lost $1 billion in August betting on Argentina’s economy recovering Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-09-06  Authors: michael sheetz
Keywords: news, cnbc, companies, argentinas, treasury, fund, tabaks, rates, lost, nationread, mean, oversold, betting, miller, matt, reportedly, recovering, yield, 10year, hedge, billion, economy


A hedge fund reportedly lost $1 billion in August betting on Argentina's economy recovering

The 10-year yield hasn’t done this in 20 years, and it could be a…

The yield on the U.S. 10-year Treasury hasn’t been this oversold since 1998, and that could mean rates are due for a lift, says Miller Tabak’s Matt Maley.

Trading Nation

read more


Company: cnbc, Activity: cnbc, Date: 2019-09-06  Authors: michael sheetz
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KBW downgrades Bank of America, says Fed rate cuts will hit earnings

The 10-year yield hasn’t done this in 20 years, and it could be a… The yield on the U.S. 10-year Treasury hasn’t been this oversold since 1998, and that could mean rates are due for a lift, says Miller Tabak’s Matt Maley. Trading Nationread more


The 10-year yield hasn’t done this in 20 years, and it could be a… The yield on the U.S. 10-year Treasury hasn’t been this oversold since 1998, and that could mean rates are due for a lift, says Miller Tabak’s Matt Maley. Trading Nationread more
KBW downgrades Bank of America, says Fed rate cuts will hit earnings Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-09-06  Authors: michael sheetz
Keywords: news, cnbc, companies, tabaks, bank, treasury, earnings, rates, nationread, mean, oversold, miller, matt, fed, kbw, yield, 10year, downgrades, america, cuts, hit, rate


KBW downgrades Bank of America, says Fed rate cuts will hit earnings

The 10-year yield hasn’t done this in 20 years, and it could be a…

The yield on the U.S. 10-year Treasury hasn’t been this oversold since 1998, and that could mean rates are due for a lift, says Miller Tabak’s Matt Maley.

Trading Nation

read more


Company: cnbc, Activity: cnbc, Date: 2019-09-06  Authors: michael sheetz
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10-year Treasury yield dives to 3-year low after manufacturing sector contracts in August

The yield on the benchmark 10-year Treasury note dove on Tuesday to its lowest level since 2016 after a report on the U.S. manufacturing sector showed that the industry contracted in August. The Institute for Supply Management said U.S. manufacturing activity contracted last month for the first time since early 2016. The yield on the 10-year note fell to its lowest level since July 2016 at 1.441%, while the yield on the 30-year Treasury bond was also lower at 1.925%. “The logic holds that if inv


The yield on the benchmark 10-year Treasury note dove on Tuesday to its lowest level since 2016 after a report on the U.S. manufacturing sector showed that the industry contracted in August. The Institute for Supply Management said U.S. manufacturing activity contracted last month for the first time since early 2016. The yield on the 10-year note fell to its lowest level since July 2016 at 1.441%, while the yield on the 30-year Treasury bond was also lower at 1.925%. “The logic holds that if inv
10-year Treasury yield dives to 3-year low after manufacturing sector contracts in August Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-09-03  Authors: thomas franck
Keywords: news, cnbc, companies, manufacturing, contracted, low, note, sector, dives, 10year, 2016, 3year, level, yield, contracts, lowest, trade, war, treasury


10-year Treasury yield dives to 3-year low after manufacturing sector contracts in August

The yield on the benchmark 10-year Treasury note dove on Tuesday to its lowest level since 2016 after a report on the U.S. manufacturing sector showed that the industry contracted in August.

The Institute for Supply Management said U.S. manufacturing activity contracted last month for the first time since early 2016.

The yield on the 10-year note fell to its lowest level since July 2016 at 1.441%, while the yield on the 30-year Treasury bond was also lower at 1.925%. Yields fall as prices rise.

“If there was any question whether or not the trade war was hurting manufacturing sentiment today’s release cleared that up with the insightful observation that ‘Comments from the panel reflect a notable decrease in business confidence,'” Ian Lyngen, head of rates research at BMO Capital Markets, wrote of the ISM number.

“The logic holds that if inventories are building faster than new orders are coming in, there is a problem on the horizon,” he added. “The trade war and issues related to the timing of cross-boarder flows have undoubtedly complicated this potentially leading indicator.”


Company: cnbc, Activity: cnbc, Date: 2019-09-03  Authors: thomas franck
Keywords: news, cnbc, companies, manufacturing, contracted, low, note, sector, dives, 10year, 2016, 3year, level, yield, contracts, lowest, trade, war, treasury


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Asia stocks mixed as investors watch US Treasury yields

Stocks in major Asian markets were mixed on Thursday as investors continued to watch the yield curve in U.S. Treasurys, which inverted further overnight. The Nikkei 225 in Japan close slightly lower at 20,460.93, while the Topix finished its trading day largely flat at 1,490.17. Investors continued to monitor the yields in U.S. Treasurys. The phenomenon, also known as a yield curve inversion, has historically preceded periods of recession. The yields on the 10-year Treasury note and 2-year note


Stocks in major Asian markets were mixed on Thursday as investors continued to watch the yield curve in U.S. Treasurys, which inverted further overnight. The Nikkei 225 in Japan close slightly lower at 20,460.93, while the Topix finished its trading day largely flat at 1,490.17. Investors continued to monitor the yields in U.S. Treasurys. The phenomenon, also known as a yield curve inversion, has historically preceded periods of recession. The yields on the 10-year Treasury note and 2-year note
Asia stocks mixed as investors watch US Treasury yields Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-08-29  Authors: eustance huang
Keywords: news, cnbc, companies, yield, usually, note, investors, curve, asia, treasurys, continued, watch, yields, day, stocks, 10year, treasury, lower, mixed


Asia stocks mixed as investors watch US Treasury yields

Stocks in major Asian markets were mixed on Thursday as investors continued to watch the yield curve in U.S. Treasurys, which inverted further overnight.

Mainland Chinese shares dipped on the day, with the Shanghai composite slipping 0.1% to about 2,890.92 and the Shenzhen component down 0.17% to 9,398.47. The Shenzhen composite was 0.172% lower at around 1,591.08. Hong Kong’s Hang Seng index, on the other hand, was up 0.28% as of its final hour of trading.

The Chinese yuan also briefly weakened to a level not seen in more than 11-and-a-half years.

The Nikkei 225 in Japan close slightly lower at 20,460.93, while the Topix finished its trading day largely flat at 1,490.17. Over in South Korea, the Kospi closed 0.4% lower at 1,933.41. Australia’s S&P/ASX 200 rose 0.1% to end its trading day at 6,507.40.

Overall, the MSCI Asia ex-Japan index rose 0.08%.

Investors continued to monitor the yields in U.S. Treasurys. The 30-year bond yield fell to a new record low of 1.907% on Wednesday before seeing a recovery. It was last at 1.9607%.

The closely-watched yield spread between the 10-year Treasury note and 2-year note also widened further on Wednesday, extending losses from the previous session where it touched its lowest level since 2007. The phenomenon, also known as a yield curve inversion, has historically preceded periods of recession.

The yields on the 10-year Treasury note and 2-year note were last at 1.4844% and 1.5119%, respectively.

“I think it’s always easy to say it’s different this time. The reality is and it’s tough to sugarcoat it, when the yield curve inverts, it’s usually a very powerful predictor of … at best a slowdown and usually … it’s a recession,” said Omar Slim, senior vice president of fixed income at PineBridge Investments, Singapore.

“The short-end with the 10-year is … where you see most of the inversion and that’s usually because the market is expecting a slowdown,” Slim told CNBC’s “Street Signs” on Thursday. He added that this was driven by fears of recession both in the U.S. as well as elsewhere globally.

Markets continued to remain on edge as investors await developments on the U.S.-China trade front, with the tariff war between the two economic powerhouses recently escalating and further dampening sentiment and raising concerns over the global economic outlook.


Company: cnbc, Activity: cnbc, Date: 2019-08-29  Authors: eustance huang
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This trade war scenario could spark doom, strategist says

A leading Wall Street firm is out with its worst-case scenario for the trade war. In a note to clients, Medley Global Advisors managing director Ben Emons wrote a dire situation would unfold if U.S. trade with China entirely stops. Where the trade between U.S. and China could really come to a standstill,” Emons told CNBC’s “Futures Now ” on Tuesday. The trade war is putting pressure on bond yields. On Tuesday, the spread between the 10-year Treasury note yield and the 2-year hit its lowest level


A leading Wall Street firm is out with its worst-case scenario for the trade war. In a note to clients, Medley Global Advisors managing director Ben Emons wrote a dire situation would unfold if U.S. trade with China entirely stops. Where the trade between U.S. and China could really come to a standstill,” Emons told CNBC’s “Futures Now ” on Tuesday. The trade war is putting pressure on bond yields. On Tuesday, the spread between the 10-year Treasury note yield and the 2-year hit its lowest level
This trade war scenario could spark doom, strategist says Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-08-28  Authors: stephanie landsman
Keywords: news, cnbc, companies, trade, yields, really, emons, spark, war, doom, large, note, 2year, 10year, strategist, china, scenario


This trade war scenario could spark doom, strategist says

A leading Wall Street firm is out with its worst-case scenario for the trade war.

In a note to clients, Medley Global Advisors managing director Ben Emons wrote a dire situation would unfold if U.S. trade with China entirely stops. As a result, large automakers, technology and industrials could see a severe decline in annual sales.

According to Emons, “This could be the equivalent of a financial crisis given the large market capitalization of the groups in S&P 500. ”

Although it’s not his base case, he believes it’s wrong to write off the risk.

“If you are actually going to stop businesses from doing business in China and China can retaliate that way, too, you really are looking at what we call a doom scenario, right? Where the trade between U.S. and China could really come to a standstill,” Emons told CNBC’s “Futures Now ” on Tuesday.

The trade war is putting pressure on bond yields. On Tuesday, the spread between the 10-year Treasury note yield and the 2-year hit its lowest level since May 2007. A 10-year rate below the 2-year is often seen as a recession indicator.


Company: cnbc, Activity: cnbc, Date: 2019-08-28  Authors: stephanie landsman
Keywords: news, cnbc, companies, trade, yields, really, emons, spark, war, doom, large, note, 2year, 10year, strategist, china, scenario


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Why record low bond yields could keep heading lower as market fears ‘disaster scenario’

The benchmark 10-year Treasury note yield, which influences everything from business loans to home mortgages, has been hugging three-year lows and was at 1.45% Wednesday. The 30-year Treasury bond yield fell to an all-time low 1.91% Wednesday as yields around the world, which move opposite price, slid to multi-year or record lows. U.S. rates followed a global move lower, with the Japanese 10-year yield falling to a new negative three-year low and the German 10-year bund yield sliding to its own


The benchmark 10-year Treasury note yield, which influences everything from business loans to home mortgages, has been hugging three-year lows and was at 1.45% Wednesday. The 30-year Treasury bond yield fell to an all-time low 1.91% Wednesday as yields around the world, which move opposite price, slid to multi-year or record lows. U.S. rates followed a global move lower, with the Japanese 10-year yield falling to a new negative three-year low and the German 10-year bund yield sliding to its own
Why record low bond yields could keep heading lower as market fears ‘disaster scenario’ Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-08-28  Authors: patti domm
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Why record low bond yields could keep heading lower as market fears 'disaster scenario'

Traders signal offers in the Ten-Year Treasury Note Options pit at the Chicago Board of Trade. Scott Olson | Getty Images

Bond yields are heading south, and there appears to be no stopping them for now. The benchmark 10-year Treasury note yield, which influences everything from business loans to home mortgages, has been hugging three-year lows and was at 1.45% Wednesday. That’s below the 2-year yield of 1.5%, and the move has been signaling recession. The 30-year Treasury bond yield fell to an all-time low 1.91% Wednesday as yields around the world, which move opposite price, slid to multi-year or record lows. U.S. rates followed a global move lower, with the Japanese 10-year yield falling to a new negative three-year low and the German 10-year bund yield sliding to its own record, minus-0.72%.

“This is one big trade,” said Gregory Faranello, head of U.S. rates at Amerivet Securities. “The momentum and trends that are in place right now are pretty steadfast. There’s nothing glaring to me that will change the dynamics right now. We’re in the latter stages of the summer months. Liquidity is definitely an issue. When you look at it globally right now, it encompasses a lot of different, diverse things. Today we have the headline from the U.K.; you have this ongoing trade war, and this global yield structure just continues to unfold.” Strategists said the bond market has been caught between a number of forces and is now a vortex sucking in investors who have to buy yield, which keep getting lower as bond prices move higher. In the past several days, investors have begun to believe that there’s a very good chance the trade wars between the U.S. and China could continue for a very long time, and possibly until after the presidential election.

Fear factors

The global economy is slowing, and increasingly there are warning signs that make it appear Europe could enter a recession. China’s slowdown has sent a chill across emerging market economies, which have seen a decline in exports. Then there is political uncertainty, which got even murkier in the U.K. on Wednesday, after Prime Minister Boris Johnson pushed back the reopening of Parliament until mid-October, limiting the amount of debate time and increasing the chances of a no-deal Brexit. Sterling fell and the 10-year gilt yield dropped to its lowest level in three years. “The disaster scenario is if yields fall dramatically from here,” said Michael Schumacher, director rates at Wells Fargo. “Hypothetically, if the trade situation intensifies, if maybe Hong Kong goes badly and Brexit seems like it results in a hard exit … then what you probably get is a massive rally again in Treasurys.” “Anyone who is handing you a hard forecast in that scenario is throwing darts,” he said. After the 10-year yield broke through the psychologically important 1.50% level Tuesday, Schumacher said investors are looking for the next target on the benchmark note at the record low it reached in the weeks after the U.K. voted for Brexit, or to leave the European Union.

“People seem to be fixated on 1.35%,” he said. For investors, he said a good place to hide might be in very short-term Treasurys. For instance, the 1-month Treasury bill was yielding 2.06%, well above other securities. “Why be a hero?” he said. Many strategists do not expect U.S. bonds to follow the rest of the world into negative yields, but they concede it could happen. The other side of the falling yield story is that bond yields could quickly snap higher, if for instance there was significant progress in the trade situation. But strategists are skeptical that will happen any time soon. “Clearly, the trade war is such a big piece of this and it remains so incredibly unpredictable. Most people feel like it’s elevated to such an extent that it’s highly unlikely to get anywhere,” said Ralph Axel, rates strategist at Bank of America Merrill Lynch. He said people are wondering why China would sign a long-term deal with President Donald Trump ahead of the election.

Sinkhole of global yields

Another major factor driving yields lower is the fact that more than $16 trillion in bonds around the world now have negative yields, and the U.S. Treasury market has been a magnet for investors looking for yield, as well as safety. Axel said he has a 1.25% target on the 10-year, and he also expects the 30-year yield to be at that level by the second quarter of next year. Faranello said yields move lower because buying forces in more buyers as investors look to lock in yield. The question is will the consumer, who has been holding up the U.S. economy, begin to react to what’s scaring markets. “If you’re a U.S. consumer, you see volatility in markets. You don’t understand it. They see negative interest rates. You see the inverted yield curve, which consumers don’t understand, and there’s talk of recession,” Faranello said. “This could be self-fulfilling at some point, and the Fed has to keep an eye on it.” Data in the next week could be important since it includes the monthly employment report next Friday and also ISM manufacutring and PMI, two indicators that have been signaling a slowdown in manufacturing “The yield curve is telling us essentially that we’re looking at zero percent GDP growth next year. That’s what the front end of the curve would imply. The question is will the yield curve win out or will policy makers be able to support the data enough,” Faranello said. “I have no idea how it’s going to play out, but there’s very incredible fear and focus on a recession.”

Central banks behind the curve


Company: cnbc, Activity: cnbc, Date: 2019-08-28  Authors: patti domm
Keywords: news, cnbc, companies, yield, rates, yields, fears, negative, curve, low, heading, market, scenario, trade, record, theres, investors, bond, 10year, disaster, treasury, lower


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Bond yields are tumbling throughout Asia Pacific

Yields for 10-year government bonds in major Asian markets have been dropping sharply as recession fears send investors pouring into the assets. Bond prices move opposite yields, and as investors rush to buy them, prices surge and yields fall in tandem. Here’s a look at how each market’s 10-year government bond yield has fallen by Thursday morning, versus a week ago and the beginning of the month. Previously, the central bank has fixed the yield on the 10-year bond at around zero, which it pegge


Yields for 10-year government bonds in major Asian markets have been dropping sharply as recession fears send investors pouring into the assets. Bond prices move opposite yields, and as investors rush to buy them, prices surge and yields fall in tandem. Here’s a look at how each market’s 10-year government bond yield has fallen by Thursday morning, versus a week ago and the beginning of the month. Previously, the central bank has fixed the yield on the 10-year bond at around zero, which it pegge
Bond yields are tumbling throughout Asia Pacific Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-08-15  Authors: weizhen tan
Keywords: news, cnbc, companies, pacific, bond, asia, week, 10year, bonds, markets, curve, tumbling, yield, yellen, yields, investors


Bond yields are tumbling throughout Asia Pacific

Pedestrians are reflected on a window of a securities company in Tokyo on Aug. 30, 2017.

Yields for 10-year government bonds in major Asian markets have been dropping sharply as recession fears send investors pouring into the assets.

Bond prices move opposite yields, and as investors rush to buy them, prices surge and yields fall in tandem.

Here’s a look at how each market’s 10-year government bond yield has fallen by Thursday morning, versus a week ago and the beginning of the month.

In Japan, the 10-year yield dropped below the Bank of Japan’s preferred range for the first time last week — falling past -0.2%. Previously, the central bank has fixed the yield on the 10-year bond at around zero, which it pegged at a range of between 0.2% and -0.2%.

Recession fears have roiled markets. The yield on the benchmark 10-year Treasury note broke below the 2-year rate early Wednesday. That so-called yield curve is a bond market phenomenon that’s been a reliable, albeit early, indicator for economic recessions.

The yield on the U.S. 30-year bond also fell to a new low.

While lower-yielding markets, such as Hong Kong, South Korea and Singapore, and mid-yielding markets such as Malaysia and China, have seen rates drifting lower, one analyst told CNBC that investors are staying away from riskier markets — the high-yielding Asia bond markets such as India and Indonesia.

That’s causing the yields of those bonds to go up, said Julio Callegari, a fixed income portfolio manager at J.P. Morgan Asset Management.

“The main reason is that these bond markets are more sensitive to risk aversion — that usually causes depreciation in their currencies and pressure on the yield curve,” he said in an email. “Overall we expect this trend to continue for a while, since broadly speaking economic growth is still slowing in the region and central banks are likely to keep easing monetary policy.”

In the U.S., investors have also been rushing into bonds. The iShares 20+ Year Treasury Bond ETF, TLT jumped 2.1% on Monday, its biggest gain in a year.

Commenting on the recent main yield curve inversion in the U.S., former Federal Reserve Chair Janet Yellen said Wednesday that “it may be a less good signal ” this time around.

“The reason for that is there are a number of factors other than market expectations about the future path of interest rates that are pushing down long-term yields,” Yellen said on Fox Business Network.

— CNBC’s Eustance Huang, Thomas Franck and Patti Domm contributed to this report.


Company: cnbc, Activity: cnbc, Date: 2019-08-15  Authors: weizhen tan
Keywords: news, cnbc, companies, pacific, bond, asia, week, 10year, bonds, markets, curve, tumbling, yield, yellen, yields, investors


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