Treasury brings back the 20-year bond to pay for the ballooning deficit

The Treasury Department is issuing a 20-year bond for the first time in 34 years to help pay for the ballooning $1 trillion dollar budget deficit. On Friday, news of the 20-year triggered a so-called “steepening” trade where Treasury yields on the long end of the curve rose, like 10-year and 30-year yields, and shorter duration yields, like the 2-year, fell. Strategists say investors were betting the new 20-year will help drive rates higher at the long end of the Treasury curve. “At that time, w


The Treasury Department is issuing a 20-year bond for the first time in 34 years to help pay for the ballooning $1 trillion dollar budget deficit.
On Friday, news of the 20-year triggered a so-called “steepening” trade where Treasury yields on the long end of the curve rose, like 10-year and 30-year yields, and shorter duration yields, like the 2-year, fell.
Strategists say investors were betting the new 20-year will help drive rates higher at the long end of the Treasury curve.
“At that time, w
Treasury brings back the 20-year bond to pay for the ballooning deficit Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-17  Authors: patti domm
Keywords: news, cnbc, companies, bond, long, treasury, yields, ballooning, brings, issuance, trillion, pay, strategists, issue, 20year, deficit, expected, end


Treasury brings back the 20-year bond to pay for the ballooning deficit

The Treasury Department is issuing a 20-year bond for the first time in 34 years to help pay for the ballooning $1 trillion dollar budget deficit.

The Treasury announced the new issue Thursday, and strategists said it could start trading as early as May. Treasury will announce more details Feb. 5, but strategists say the new bond should see good demand though it may trade at a discount initially as the market adjusts to it.

On Friday, news of the 20-year triggered a so-called “steepening” trade where Treasury yields on the long end of the curve rose, like 10-year and 30-year yields, and shorter duration yields, like the 2-year, fell. Yields move opposite price. Strategists say investors were betting the new 20-year will help drive rates higher at the long end of the Treasury curve. The 10-year yield Friday rose 2 basis points to 1.82%, while the 2-year yield was at 1.55%, off from a high of 1.58%.

“You’ve got more supply coming at the back end, and people think implicitly Treasury won’t take all of the 20-year supply out of the 10-years and 30-years, so there’s more long issuance coming and there will be less front end,” said Michael Schumacher, director, rates at Wells Fargo. Strategists expect the Treasury to trim back some of its 10-year and 30-year bond issuance to make room for the 20-year and Schumacher said the Treasury could pare some Treasury bill issuance, which is its shortest term debt including 1-month and 3-month maturities.

Schumacher said the new 20-year could carry a yield similar to old 30-year bonds that mature in 2040, now yielding about 2.16%. He expects the Treasury would issue about $150 to $160 billion a month of the new security.

“For the 20-year, the plumbing is still all set up. This would fit nicely into the futures contracts,” Schumacher said, noting the Treasury’s net issuance is about $1 trillion a year. “If the Treasury had gone with the 50-year, it would have been out there by itself. It’s guess work where that would have to price. This is a lot more clear.”

Schumacher said he polled investors and there was much more interest in the 20-year than 50-year bonds. “We’re fans of this,” he said, adding he expects strong investor interest.

Other strategists do as well, though the issue may take some time to catch on.

“Out of the gate, we think it might trade a little cheaper than 10s and 30s, as the liquidity is built out and the investor community becomes used to the new auction schedule,” said Ben Jeffery, fixed income strategist at BMO. “It makes a lot of sense to fulfill their funding needs. Given there’s a natural demand point on the curve at the 20-year space, it matches better. It meshes with some of the traditional buyers of duration, like pension funds.”

Strategists say the way Treasury made the announcement was a surprise, particularly since it could have announced it when it releases details on its refunding in February.

NatWest Markets strategists said they were surprised the Treasury was issuing the 20-year now, while it would have made more sense two years ago when the Treasury was looking forward to larger auctions.

“While deficits are still running high, the current auction calendar should already cover most of those funding needs, with bills (which will largely be absorbed by the Fed) picking up the difference. Contrast this to 2017, when coupon issuance was set to rise significantly and a 20-year could have easily been added to the calendar without needing to scale back at any other point,” the NatWest strategists wrote in a note. “At that time, we had been strong advocates for a 20-year issue, and had even penciled one into our baseline forecasts. Now, with existing coupon auction sizes expected to remain flat, we had assumed the urgency to roll out a 20-year security would have waned.”

The Treasury issued a total $2.7 trillion in Treasurys in calendar year 2019, including gross coupon bills, notes and bonds; floating rate notes and TIPS, and until this announcement those amounts were not expected to change, according to NatWest Markets.

Andrew Brenner of National Alliance says he would have preferred longer duration issuance, so the Treasury could take advantage of low interest rates to cover the growing debt.

“I would have loved to see a 40-year of 50-year but they [dealers] convinced the Treasury there wasn’t demand for them,” he said. “We really need to lock in low yields long term but 20-years was the compromise.”

The budget deficit is expected to surpass $1 trillion for the first time since 2012 in this fiscal year, and it is expected to continue growing. For the year ended last Sept. 30, the deficit was $984 billion.


Company: cnbc, Activity: cnbc, Date: 2020-01-17  Authors: patti domm
Keywords: news, cnbc, companies, bond, long, treasury, yields, ballooning, brings, issuance, trillion, pay, strategists, issue, 20year, deficit, expected, end


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Wall Street’s beleaguered bond traders relive their glory days with a breakout quarter

Wall Street firms just posted the biggest surge to bond-trading revenue in years, helping several banks break records for annual profit — but don’t expect the party to last. Morgan Stanley said earlier Thursday that its fixed income division – a chronic underperformer a few years ago – posted a 126% surge in fourth-quarter revenue to $1.27 billion. At J.P. Morgan Chase, bond trading revenue rose 86% to $3.4 billion, exceeding estimates by $800 million. In late 2018, spikes in volatility across a


Wall Street firms just posted the biggest surge to bond-trading revenue in years, helping several banks break records for annual profit — but don’t expect the party to last.
Morgan Stanley said earlier Thursday that its fixed income division – a chronic underperformer a few years ago – posted a 126% surge in fourth-quarter revenue to $1.27 billion.
At J.P. Morgan Chase, bond trading revenue rose 86% to $3.4 billion, exceeding estimates by $800 million.
In late 2018, spikes in volatility across a
Wall Street’s beleaguered bond traders relive their glory days with a breakout quarter Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-16  Authors: hugh son
Keywords: news, cnbc, companies, days, morgan, fixed, streets, surge, exceptionally, relive, bond, revenue, quarter, breakout, glory, good, posted, traders, beleaguered, wall, income


Wall Street's beleaguered bond traders relive their glory days with a breakout quarter

Traders signal offers in the Ten-Year Treasury Note Options pit at the Chicago Board of Trade.

Wall Street firms just posted the biggest surge to bond-trading revenue in years, helping several banks break records for annual profit — but don’t expect the party to last.

Morgan Stanley said earlier Thursday that its fixed income division – a chronic underperformer a few years ago – posted a 126% surge in fourth-quarter revenue to $1.27 billion. At J.P. Morgan Chase, bond trading revenue rose 86% to $3.4 billion, exceeding estimates by $800 million. Goldman Sachs and Citigroup also handily beat expectations.

But the good times are probably fleeting. For one, the rebound happened because business had been exceptionally lousy a year ago, making the year-over-year comparison easier. In late 2018, spikes in volatility across asset classes caused institutional clients to stay on the sidelines, and even mighty J.P. Morgan posted its worst bond-trading results in a decade.

“It was a good year for fixed income traders off the back of some very challenging years,” said David McCormack, head of recruitment firm DMC Partners. “Guys who had been exceptionally well paid have seen their compensation come down for a decade as the business has declined.”


Company: cnbc, Activity: cnbc, Date: 2020-01-16  Authors: hugh son
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Bond data back to the Black Death shows lower and even negative rates could be here to stay

Crisfotolux | Getty ImagesMore than 700 years of history show that the times as they are now, at least in regard to interest rates, aren’t quite so different as we’re led to believe, according to research that goes back to the Black Death plague of the 14th century. In fact, the low interest rate climate has been more rule than exception and indicative that even negative interest rates shouldn’t be considered a major aberration, and may stay there — permanently. The work from Paul Schmelzing at


Crisfotolux | Getty ImagesMore than 700 years of history show that the times as they are now, at least in regard to interest rates, aren’t quite so different as we’re led to believe, according to research that goes back to the Black Death plague of the 14th century.
In fact, the low interest rate climate has been more rule than exception and indicative that even negative interest rates shouldn’t be considered a major aberration, and may stay there — permanently.
The work from Paul Schmelzing at
Bond data back to the Black Death shows lower and even negative rates could be here to stay Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-14  Authors: jeff cox
Keywords: news, cnbc, companies, interest, schmelzing, rates, negative, stay, rate, black, historical, stagnation, lower, bond, theory, wealth, global, data, death, shows


Bond data back to the Black Death shows lower and even negative rates could be here to stay

Plague Doctor Mask. Crisfotolux | Getty Images

More than 700 years of history show that the times as they are now, at least in regard to interest rates, aren’t quite so different as we’re led to believe, according to research that goes back to the Black Death plague of the 14th century. In fact, the low interest rate climate has been more rule than exception and indicative that even negative interest rates shouldn’t be considered a major aberration, and may stay there — permanently. The work from Paul Schmelzing at the Bank of England runs counter to a popular economic theory known as “secular stagnation.” The idea, put forth most prominently by former White House economist and Treasury Secretary Larry Summers, contends that the recent low-growth low-rate environment is likely to persist and is linked to causes that aren’t likely to go away soon. However, by tracing rates back to 1311, Schmelzing found that the current state of affairs is consistent with the results over time.

“Against their long‑term context, currently depressed sovereign real rates are in fact converging ‘back to historical trend’ — a trend that makes narratives about a ‘secular stagnation’ environment entirely misleading, and suggests that — irrespective of particular monetary and fiscal responses — real rates could soon enter permanently negative territory,” Schmelzing wrote. The paper comes as some $11 trillion in global sovereign debt continues to carry negative yields. In theory, that means that investors buying those bonds actually have to pay for the privilege of doing so. In practice, it has meant below-zero deposit rates through a wide span of Europe, though the total of negative-yielding debt is down from a high around $17 trillion earlier in 2019.

Role in wealth inequality

Secular stagnation is a theory that traces back to the Great Depression, and has been cited both as an explanation for the current global pattern of low rates as well as growing wealth inequality. Economist Thomas Piketty in 2014 released the landmark “Capital in the Twenty-First Century” book that explored the inequality issue further and argued that a global wealth tax should be used to restore balance. Schmelzing also argues against Piketty’s findings that wealth for the upper echelon is greatly outpacing economic growth. The conclusions, Schmelzing wrote, are “equally unsubstantiated by the historical record” and “overwhelmingly omit archival and other historical factual evidence.”

Piketty disputed the characterization of his work. “If you look at stock market rates of return, or at the rate at which top billionaire wealth rises year after year, it is clear that the relevant rate of return is substantial, and much larger than the growth rate,” Piketty said in an email to CNBC. Summers did not respond to a request for comment.

The new ‘norm’


Company: cnbc, Activity: cnbc, Date: 2020-01-14  Authors: jeff cox
Keywords: news, cnbc, companies, interest, schmelzing, rates, negative, stay, rate, black, historical, stagnation, lower, bond, theory, wealth, global, data, death, shows


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Treasury yields rise on final trading day of 2019

U.S. government debt prices moved lower on Tuesday, the last trading day of the year. ET, the yield on the benchmark 10-year Treasury note rose to around 1.9034%, while the yield on the 30-year Treasury bond was also higher at 2.3574%. Bond yields move inversely to prices. Chinese Vice Premier Liu He, the country’s top trade negotiator, is set to visit Washington later this week to sign the agreement. In terms of economic data, investors will be looking out for consumer confidence figures for De


U.S. government debt prices moved lower on Tuesday, the last trading day of the year.
ET, the yield on the benchmark 10-year Treasury note rose to around 1.9034%, while the yield on the 30-year Treasury bond was also higher at 2.3574%.
Bond yields move inversely to prices.
Chinese Vice Premier Liu He, the country’s top trade negotiator, is set to visit Washington later this week to sign the agreement.
In terms of economic data, investors will be looking out for consumer confidence figures for De
Treasury yields rise on final trading day of 2019 Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-12-31  Authors: ryan browne
Keywords: news, cnbc, companies, bond, rise, trade, treasury, week, 2019, trading, yield, final, yearat, worlds, yields, washington, day


Treasury yields rise on final trading day of 2019

U.S. government debt prices moved lower on Tuesday, the last trading day of the year.

At 3:50 a.m. ET, the yield on the benchmark 10-year Treasury note rose to around 1.9034%, while the yield on the 30-year Treasury bond was also higher at 2.3574%. Bond yields move inversely to prices.

Investors have been taking on more risk on the back of optimism over U.S.-China trade relations. The world’s two largest economies agreed earlier this month to a so-called “phase one” trade deal.

Chinese Vice Premier Liu He, the country’s top trade negotiator, is set to visit Washington later this week to sign the agreement.

In terms of economic data, investors will be looking out for consumer confidence figures for December due to be released at 10 a.m. ET.


Company: cnbc, Activity: cnbc, Date: 2019-12-31  Authors: ryan browne
Keywords: news, cnbc, companies, bond, rise, trade, treasury, week, 2019, trading, yield, final, yearat, worlds, yields, washington, day


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Treasury yields tick lower in thin holiday trading

U.S. Treasury yields ticked slightly lower on Friday, heading into a week of trading thinned by the mid-week holiday. ET, the yield on the benchmark 10-year Treasury note traded lower at 1.891%, while the yield on the 30-year Treasury bond traded lower at 2.320%. Bond yields move inversely to the price of the debt. December’s market rally has also come as yields bounce back, with both stocks and bond yields benefiting ever since the U.S. and China announced a phase one trade agreement earlier th


U.S. Treasury yields ticked slightly lower on Friday, heading into a week of trading thinned by the mid-week holiday.
ET, the yield on the benchmark 10-year Treasury note traded lower at 1.891%, while the yield on the 30-year Treasury bond traded lower at 2.320%.
Bond yields move inversely to the price of the debt.
December’s market rally has also come as yields bounce back, with both stocks and bond yields benefiting ever since the U.S. and China announced a phase one trade agreement earlier th
Treasury yields tick lower in thin holiday trading Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-12-27  Authors: michael sheetz spriha srivastava, michael sheetz, spriha srivastava
Keywords: news, cnbc, companies, trading, treasury, trade, holiday, deal, signing, chinese, lower, yield, traded, yields, tick, bond


Treasury yields tick lower in thin holiday trading

U.S. Treasury yields ticked slightly lower on Friday, heading into a week of trading thinned by the mid-week holiday.

At about 7:45 a.m. ET, the yield on the benchmark 10-year Treasury note traded lower at 1.891%, while the yield on the 30-year Treasury bond traded lower at 2.320%. Bond yields move inversely to the price of the debt.

With equities at record high levels, investors continue to run back into traditional assets. December’s market rally has also come as yields bounce back, with both stocks and bond yields benefiting ever since the U.S. and China announced a phase one trade agreement earlier this month. The two countries are in the process of translating the deal, aiming to sign it in early January.

In a regular press briefing on Thursday, the Chinese Commerce Ministry said China is in close touch with the U.S. on signing the initial trade pact. President Donald Trump said Tuesday the deal is “getting done,” adding there will be a signing ceremony with Chinese leader Xi Jinping.

No auctions are scheduled for Friday.


Company: cnbc, Activity: cnbc, Date: 2019-12-27  Authors: michael sheetz spriha srivastava, michael sheetz, spriha srivastava
Keywords: news, cnbc, companies, trading, treasury, trade, holiday, deal, signing, chinese, lower, yield, traded, yields, tick, bond


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China to improve mechanism to deal with bond defaults as delinquencies rise, Chinese media says

US dollar and Chinese yuan arranged for a photograph on September 7, 2017. China will improve the mechanism to deal with bond defaults, as the number of corporate delinquencies rise, the official Shanghai Securities News reported on Wednesday. China’s central bank, securities watchdog and the state planning commission will soon publish rules that will regulate the disposal of corporate bond defaults, the newspaper said. Authorities will also publish guidelines for trustee business and creditor m


US dollar and Chinese yuan arranged for a photograph on September 7, 2017.
China will improve the mechanism to deal with bond defaults, as the number of corporate delinquencies rise, the official Shanghai Securities News reported on Wednesday.
China’s central bank, securities watchdog and the state planning commission will soon publish rules that will regulate the disposal of corporate bond defaults, the newspaper said.
Authorities will also publish guidelines for trustee business and creditor m
China to improve mechanism to deal with bond defaults as delinquencies rise, Chinese media says Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-12-25
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China to improve mechanism to deal with bond defaults as delinquencies rise, Chinese media says

US dollar and Chinese yuan arranged for a photograph on September 7, 2017.

China will improve the mechanism to deal with bond defaults, as the number of corporate delinquencies rise, the official Shanghai Securities News reported on Wednesday.

China’s central bank, securities watchdog and the state planning commission will soon publish rules that will regulate the disposal of corporate bond defaults, the newspaper said.

Authorities will also publish guidelines for trustee business and creditor meetings, according to the report.

In 2020, China will step up monitoring credit risks, stabilize market expectations, and crack down on the practice of dodging repayment obligations, the newspaper reported, citing Zou Lan, a senior official of the People’s Bank of China.

Default rate among China’s private issuers of bonds have climbed to a record high of 4.9% during the first 11 months of the year, and could face similar pressure in 2020, according to rating agency Fitch.


Company: cnbc, Activity: cnbc, Date: 2019-12-25
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China to improve mechanism to deal with bond defaults as delinquencies rise, Chinese media says

US dollar and Chinese yuan arranged for a photograph on September 7, 2017. China will improve the mechanism to deal with bond defaults, as the number of corporate delinquencies rise, the official Shanghai Securities News reported on Wednesday. China’s central bank, securities watchdog and the state planning commission will soon publish rules that will regulate the disposal of corporate bond defaults, the newspaper said. Authorities will also publish guidelines for trustee business and creditor m


US dollar and Chinese yuan arranged for a photograph on September 7, 2017.
China will improve the mechanism to deal with bond defaults, as the number of corporate delinquencies rise, the official Shanghai Securities News reported on Wednesday.
China’s central bank, securities watchdog and the state planning commission will soon publish rules that will regulate the disposal of corporate bond defaults, the newspaper said.
Authorities will also publish guidelines for trustee business and creditor m
China to improve mechanism to deal with bond defaults as delinquencies rise, Chinese media says Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-12-25
Keywords: news, cnbc, companies, mechanism, deal, china, official, securities, improve, media, defaults, bond, newspaper, rise, chinese, according, corporate, delinquencies, bank, publish, reported


China to improve mechanism to deal with bond defaults as delinquencies rise, Chinese media says

US dollar and Chinese yuan arranged for a photograph on September 7, 2017.

China will improve the mechanism to deal with bond defaults, as the number of corporate delinquencies rise, the official Shanghai Securities News reported on Wednesday.

China’s central bank, securities watchdog and the state planning commission will soon publish rules that will regulate the disposal of corporate bond defaults, the newspaper said.

Authorities will also publish guidelines for trustee business and creditor meetings, according to the report.

In 2020, China will step up monitoring credit risks, stabilize market expectations, and crack down on the practice of dodging repayment obligations, the newspaper reported, citing Zou Lan, a senior official of the People’s Bank of China.

Default rate among China’s private issuers of bonds have climbed to a record high of 4.9% during the first 11 months of the year, and could face similar pressure in 2020, according to rating agency Fitch.


Company: cnbc, Activity: cnbc, Date: 2019-12-25
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Corporate bond market has some positives, but may not do as well in 2020 as it did this year

If I look at investment grade corporate bonds, they’re up about 10% year-to-date,” said Kevin Mahn, CIO and president of Hennion and Walsh. Duensing said 2020 should continue to see strong demand for U.S. corporate bonds from overseas investors. Yields move opposite price, so as prices rose on corporate debt, the spreads “tightened,” as yields moved closer to Treasury yields of the similar duration. She said corporate bonds are highly liquid and in strong demand. About half of investment grade c


If I look at investment grade corporate bonds, they’re up about 10% year-to-date,” said Kevin Mahn, CIO and president of Hennion and Walsh.
Duensing said 2020 should continue to see strong demand for U.S. corporate bonds from overseas investors.
Yields move opposite price, so as prices rose on corporate debt, the spreads “tightened,” as yields moved closer to Treasury yields of the similar duration.
She said corporate bonds are highly liquid and in strong demand.
About half of investment grade c
Corporate bond market has some positives, but may not do as well in 2020 as it did this year Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-12-23  Authors: patti domm
Keywords: news, cnbc, companies, bbb, market, debt, corporate, investment, grade, positives, global, companies, bonds, bond, 2020


Corporate bond market has some positives, but may not do as well in 2020 as it did this year

Traders work on the floor at the New York Stock Exchange. Eduardo Munoz | Reuters

High-grade corporate bonds had a great year in 2019, but 2020 is not likely to be as good, though there are still plenty of positives for investors looking for a fixed income alternative to stocks. “Coming out of 2019 everything worked but some asset classes, some sectors worked better than others. If I look at investment grade corporate bonds, they’re up about 10% year-to-date,” said Kevin Mahn, CIO and president of Hennion and Walsh. That gain in the Vanguard Intermediate-Term Corporate Bond Index Fund ETF was eclipsed by much bigger annual gains in stocks, with the S&P 500 up more than 28%. “It would be hard to imagine we could do better than we did in 2019. It was kind of perfect from a total return standpoint. It was a combination of yield levels moving lower and credit spreads narrowing,” said Jon Duensing, director of investment grade corporates at Amundi Pioneer. Duensing said 2020 should continue to see strong demand for U.S. corporate bonds from overseas investors. “If you look a where spreads are now relative to long term averages, they’re certainly inside of long term averages. You could point to decent economic conditions, very supportive monetary policy positions from the U.S. central bank and supportive demand from non U.S. business investors. A lot of that is priced in,” said Duensing. Duensing said one risk for the market in 2020 is the U.S. presidential election, which could create volatility. Yields move opposite price, so as prices rose on corporate debt, the spreads “tightened,” as yields moved closer to Treasury yields of the similar duration. That tightening accelerated into the end of the year, as investors sold Treasurys and became more confident about the economic outlook. The ICE BofA US IG Corporate (C0A0) Index shows 14.071% of total return year-to-date and BofA Global Research expects total return of 4% to 6% for 2020. “We like corporate bonds for next year because global banks led by the Federal Reserve have essentially extended the cycle by lowering rates and also pumping massive liquidity into the system,” said Alicia Levine, chief strategist at BNY Mellon Wealth Investment Management. “They’ve just stabilized the market, not that it wasn’t stable.” She said corporate bonds are highly liquid and in strong demand. “Global pension funds and insurance companies cannot buy equities. they have to buy bonds and the with the global liquidity and dovish banks globally, it’s good for the bond market.”

Concern about downgrades

2019 was a year of recovery after spreads had widened and markets were dicey at the end of 2018. While stocks were plummeting, the spread between the yield on high-grade corporate debt and Treasurys, with a duration of about 7-years, was about 1.59 basis points, at the end of 2018. Last week, the spread between the high-grade corporate yield and the comparable Treasury was very close to 1.00, closer to where it was at the end of 2017. Source: BofA Global Research While most investors consider high-yielding junk bonds the risky part of the corporate market, investment grade debt is by no means worry free. About half of investment grade corporate bonds are rated BBB, the level just above junk bond. While some analysts have been concerned about downgrades in that tier of the corporate market, Duensing said some companies whose bonds are on the the weakest rung of investment grade have actually been doing the most to remove the concern. “There still are a large portion of the investment grade universe that’s triple-B rated. The difference between where we were a year ago is we’ve seen more commitment from management teams to actively deleverage the balance sheet,” he said. Telecommunications companies have been some of those working to reverse concerns about their debt. AT&T, for instance, took on about $40 billion in debt when it bought Time Warner in 2018. The company sold assets and focused on debt reduction. In its third quarter earnings report in late October, AT&T reported that it had reduced net debt by $3.6 billion in the quarter and reduced it by $12.7 billion year-to-date. Companies also have tried to elevate their ratings, and that could mean cheaper borrowing rates. “Over the last couple of years, we’ve seen a higher rate of companies being upgraded to investment grade than we’ve seen being downgraded to high yield,” Duensing said. S&P Global Ratings, in a note, cites a U.S. economic slowdown, credit-risk differentiation and U.S. policy risk, such as trade, as potential negatives for corporate debt in 2020 and beyond.

Leverage reduced

They noted the BBB tier of companies could be impacted as economic growth slows, especially in more cyclical sectors, like automotive. Ford and General Motors are among the top 10 borrowers in BBB. “Debt levels and leverage for the top 10 borrowers in this rating segment have decreased slightly this year as a result of debt repayments at AT&T and General Electric, which offset United Technologies’ and Broadcom’s borrowing to fund acquisitions,” S&P Global analysts noted. S&P says the weighted-average leverage declined slightly to 3 times by mid-2019 from 3.2 times at the end of last year. “We expect credit metrics will continue to improve in 2020, with the majority of the top 10 maintaining relatively stable metrics and a few achieving more notable improvements,” S&P analysts wrote. “We expect leverage to decline at General Electric, CVS Health, and United Technologies in 2020, largely as a result of asset sales, continued debt repayment, and an all-stock merger, respectively.” Downgrade risk and upgrade potential for the top 10 companies in the BBB category are “relatively balanced,” with two of the companies, Verizon and United Technologies, with ‘BBB+’ ratings, the highest tier of BBB, the ratings firm said. “The rating outlook on Verizon is positive, while the rating on United Technologies is on CreditWatch with positive implications, indicating that these companies could be upgraded to the ‘A’ category in 2020. Three companies are rated ‘BBB-‘: Ford, Energy Transfer, and Broadcom. These represent 27% of the top 10 debt. The outlooks are stable,” the S&P Global analysts wrote.

Ways to play


Company: cnbc, Activity: cnbc, Date: 2019-12-23  Authors: patti domm
Keywords: news, cnbc, companies, bbb, market, debt, corporate, investment, grade, positives, global, companies, bonds, bond, 2020


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Treasury yields tick lower as investors await bond auctions

U.S. government debt prices were higher Wednesday morning, as investors seek more clarity over U.S.-China trade developments. ET, the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 1.8679%, while the yield on the 30-year Treasury bond was also lower at around 2.2952%. Market focus is largely attuned to global trade developments, as investors await more details about a preliminary agreement between the U.S. and China. Late last week, President Donald Trump an


U.S. government debt prices were higher Wednesday morning, as investors seek more clarity over U.S.-China trade developments.
ET, the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 1.8679%, while the yield on the 30-year Treasury bond was also lower at around 2.2952%.
Market focus is largely attuned to global trade developments, as investors await more details about a preliminary agreement between the U.S. and China.
Late last week, President Donald Trump an
Treasury yields tick lower as investors await bond auctions Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-12-18  Authors: sam meredith
Keywords: news, cnbc, companies, investors, auctions, set, bond, trump, week, largest, yields, await, lower, tick, trade, treasury, president, worlds


Treasury yields tick lower as investors await bond auctions

U.S. government debt prices were higher Wednesday morning, as investors seek more clarity over U.S.-China trade developments.

At 3:30 a.m. ET, the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 1.8679%, while the yield on the 30-year Treasury bond was also lower at around 2.2952%.

Market focus is largely attuned to global trade developments, as investors await more details about a preliminary agreement between the U.S. and China.

Late last week, President Donald Trump and Chinese officials announced that the world’s two largest economies had agreed on a so-called “phase one” deal. It is understood that Beijing agreed to billions of dollars in agricultural purchases from the U.S., while Trump said he would not move ahead with a new round of planned tariffs, among other items.

The deal, which is not yet signed, is set to be confirmed in the first week of January, according to U.S. Trade Representative Robert Lighthizer.

The U.S. Treasury is set to auction $18 billion in 1-year-and-10-month floating rate notes (FRNs) on Wednesday.

Market participants are also likely to closely monitor speeches from policymakers at the U.S. central bank, with Chicago Fed President Charles Evans and Fed Governor Lael Brainard both set to comment on the world’s largest economy.

No major economic data is scheduled on Wednesday.


Company: cnbc, Activity: cnbc, Date: 2019-12-18  Authors: sam meredith
Keywords: news, cnbc, companies, investors, auctions, set, bond, trump, week, largest, yields, await, lower, tick, trade, treasury, president, worlds


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‘Bond King’ Gundlach says a recession is ‘very unlikely’ in 2020

DoubleLine Capital CEO and Wall Street “Bond King” Jeffrey Gundlach is not worried about a possible recession in 2020 even though he doesn’t think China and the U.S. will get a trade deal done anytime soon. “We’ve never had a recession without negative leading indicators,” Gundlach told CNBC’s Scott Wapner on Wednesday. Gundlach noted that consumers’ perception of current conditions would have to drastically deteriorate while weekly jobless claims spike up for a recession to take place. Manufact


DoubleLine Capital CEO and Wall Street “Bond King” Jeffrey Gundlach is not worried about a possible recession in 2020 even though he doesn’t think China and the U.S. will get a trade deal done anytime soon.
“We’ve never had a recession without negative leading indicators,” Gundlach told CNBC’s Scott Wapner on Wednesday.
Gundlach noted that consumers’ perception of current conditions would have to drastically deteriorate while weekly jobless claims spike up for a recession to take place.
Manufact
‘Bond King’ Gundlach says a recession is ‘very unlikely’ in 2020 Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-12-11  Authors: fred imbert
Keywords: news, cnbc, companies, sentiment, week, 2020, recent, bond, trade, deal, weekly, think, low, unlikely, gundlach, theres, king, recession


'Bond King' Gundlach says a recession is 'very unlikely' in 2020

DoubleLine Capital CEO and Wall Street “Bond King” Jeffrey Gundlach is not worried about a possible recession in 2020 even though he doesn’t think China and the U.S. will get a trade deal done anytime soon.

“We’ve never had a recession without negative leading indicators,” Gundlach told CNBC’s Scott Wapner on Wednesday. “Leading indicators are low right now … but numbers that are rolling off from the December-January period are quite low. So our forecast is that those are going to improve, which makes it very unlikely that we’ll have a recession in the next six to 12 months.”

Gundlach noted that consumers’ perception of current conditions would have to drastically deteriorate while weekly jobless claims spike up for a recession to take place. Consumer sentiment has tapered off in recent months but remains at relatively high levels. Weekly jobless claims, meanwhile, fell to a seven-month low in the week that ended Nov. 30.

Earlier this year, investors grew concerned about the potential for a recession as global manufacturing activity slowed down while business sentiment was dented by the U.S.-China trade war. Manufacturing activity has stabilized since then while recent optimism around a possible trade deal between the world’s largest economies lifted stocks to record highs in October and November.

However, uncertainty around trade increased this week after a slew of mixed reports and comments from a top U.S. official raised questions about both sides striking a deal before a Sunday deadline. If a deal is not reached by then, additional U.S. tariffs on Chinese goods will take effect.

Gundlach added Wednesday that he does not think an agreement will be reached before the 2020 presidential election. “There’s absolutely no reason for China to do a trade deal on the terms the United States wants when there’s an election coming up in less than a year,” he said.


Company: cnbc, Activity: cnbc, Date: 2019-12-11  Authors: fred imbert
Keywords: news, cnbc, companies, sentiment, week, 2020, recent, bond, trade, deal, weekly, think, low, unlikely, gundlach, theres, king, recession


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