The Bond Conundrum And How To Manage

The past couple of weeks have been breathtaking for bond investors and observers of the bond market. The yield on the Treasury bond is now at a record low—it dipped under 2% this week— and the Treasury is not far off its record low of 1.36% set in July 2016, the yield now sits at 1.53%. With a little more than two weeks gone in August, we have seen the 10-year drop 47 basis points and the 30-year 53 basis points. This is more movement in two weeks than we sometimes see in six months.

US 30 Yr Bond Vs Core CPI

There are many crosscurrents here. Most pundits are using the inversion of the yield curve as a forecast of a slowdown. But as we have noted in other pieces, economic slowdowns are far from synchronous with inversions. Growth continued for a year and a half after the yield curve inverted in 2006.

Looking at recent economic data, it’s pretty hard to find the slowdown:

advanced 0.7% month-over-month in July, versus an expectation of 0.3%. The (New York survey of business conditions) advanced 4.8% versus an expectation of 2.0%. is 2.2 % over the trailing 12-month level—right where it was at the end of December when the 10-year bond yield stood at 2.685% and the 30-year bond yield was 3.01%. The and the are still up double digits this year—even after this week’s turmoil. Second-quarter nonfarm productivity is at 2.3% vs. a 1.4% expectation.

This does not look like an economy that is rolling over. Nor is it.

This is a bond market that has been buffeted by a number of factors that are not U.S.-related.

Europe is mired in negative interest rates. The wisdom of having negative interest is strongly debated.

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Europe stocks advance as traders return to Italian equities

Europe stocks trade higher on Wednesday, with traders bidding higher risky assets in early action.

After losing ground on Tuesday amid political upheaval in Italy, the Stoxx Europe 600 SXXP, +0.61%  rose 0.46% to 373.00, led by oil giants including BP BP, +0.98%   and Total FP, +0.87%  . Banks SX7E, +0.85%   also gained ground.

Italy’s FTSE MIB I945, +1.27%  , up about 12% for the year, rose 0.77% to 20643.95 as the nation waits for Italian President Sergio Mattarella to decide whether to hold fresh elections after the resignation of Prime Minister Giuseppe Conte on Tuesday.

The German DAX DAX, +0.56%  added 0.37% to 11694.15, the French CAC 40 PX1, +0.86%  gained 0.61% to 5377.37 and the U.K. FTSE 100 UKX, +0.67%  rose 0.4% to 7153.61.

Markets were awaiting fresh data on U.S. existing home sales, and after the European close, the release of minutes from the last Fed meeting.

After a 173-point drop in the Dow Jones Industrial Average DJIA, -0.66%   on Tuesday, U.S. stock futures ES00, +0.58%  were higher.

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Asia Markets: Asian markets pull back after recession fears weigh on Wall Street

Asian markets were mostly lower in early trading Wednesday, after recession worries led to losses on Wall Street.

President Donald Trump on Tuesday admitted that tariffs against Chinese goods may cause economic pain in the U.S., but said his hard line is necessary and will be worth it in the long run. “It’s about time, whether it’s good for our country or bad for our country short-term,” Trump said, adding that he didn’t think the nation was at risk of recession.

Japan’s Nikkei NIK, -0.30%   fell 0.3% while Hong Kong’s Hang Seng Index HSI, +0.05%   gave up early gains and was up 0.1%. The Shanghai Composite SHCOMP, +0.11%   also slid from session highs, and was last about flat, while the smaller-cap Shenzhen Composite 399106, +0.14%   was also unchanged. South Korea’s Kospi 180721, +0.14%  and Taiwan’s Y9999, +0.03% benchmark indexes were flat, Singapore STI, -0.29%  fell 0.4%, Malaysia FBMKLCI, -0.19%  dropped 0.2% and Indonesia JAKIDX, -0.58%   0.6%. Australia’s S&P/ASX 200 XJO, -0.89%   slipped 1%.

Among individual stocks, SoftBank 9984, -2.98%   and Mazda Motor 7261, -3.16%   fell in Tokyo trading, while Fast Retailing 9983, +1.12%   rose. In Hong Kong, CSPC Pharmaceutical 1093, +5.28%   gained while Geely Automobile 175, +0.54%   and Sunny Optical 2382, +0.66%   fell. Kia Motors 000270, -1.16%   advanced in South Korea, while Foxconn 2354, +1.44%   gained in Taiwan. Mining giants BHP BHP, -2.42%   and Rio Tinto RIO, -2.17%   fell in Australia, and banking stocks, led by Westpac WBC, -1.57%  , slid.

U.S. stocks fell Tuesday after another slide in bond yields and a mixed batch of corporate earnings. Financial sector stocks led the declines.

Investors looked ahead to the Fed’s release Wednesday of notes from its policymaking meeting last month and a speech Friday

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Analysis: 15 ways to compare the Trump economy vs. Obama economy

Is a recession coming in 2020 or 2021? Experts continue to debate the conflicting signals, but an equally telling question might be: How does the “Trump economy” compare to Barack Obama’s?

President Donald Trump constantly refers to the economy as “strong,” “terrific” and the “greatest in the history of our country,” but a closer look at the data shows a mixed picture in terms of whether the economy is any better than it was in Obama’s final years. The economy is growing at about the same pace as it did in Obama’s last years, and unemployment, while lower under Trump, has continued a trend that began in 2011.

The best case Trump can make for improvement since he took office is higher wages. The typical American worker’s pay is finally growing more than 3 percent a year, a level not seen since before the Great Recession. Similarly, consumer and business confidence surged after Trump’s election and has remained high, and manufacturing output (and jobs) also saw a noticeable jump in 2018 after Trump’s tax cut, although manufacturing is now struggling. There’s also been a drop in the number of Americans on food stamps.

But in other areas Trump’s record does not look as rosy. Government debt and the trade deficit are climbing (while most economists don’t worry about the rising trade deficit, Trump made it a central part of his 2016 election campaign), and business investment is faltering as corporate leaders say they are wary of Trump’s trade war. The number of Americans lacking health insurance is also ticking up slightly.

As for two of Trump’s favorite metrics – stocks and jobs – there is a case to be made that those looked better under Obama, although most economists expected job gains to slow now that the economic recovery is

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Asian stocks follow Wall Street lower before U.S. Fed release

Joe McDonald, The Associated Press
Published Wednesday, August 21, 2019 12:38AM EDT

BEIJING — Asia stock markets followed Wall Street lower Wednesday as investors looked ahead to a speech by the Federal Reserve chairman for signs of possible plans for more U.S. interest rate cuts.

Benchmarks in Tokyo, Shanghai and Australia declined while South Korea advanced.

U.S. stocks fell Tuesday after another slide in bond yields and a mixed batch of corporate earnings. Financial sector stocks led the declines.

Investors looked ahead to the Fed’s release Wednesday of notes from its policymaking meeting last month and a speech Friday by chairman Jerome Powell.

Markets have “entered a holding pattern” ahead of Powell’s speech at an annual gathering in Jackson Hole, Wyoming, said Jeffrey Halley of Oanda in a report.

Investors expect Powell to signal the Fed “is about to embark on a reinvigorated wave of easing,” said Halley. However, he said U.S. data “simply does not support the need for an aggressive easing cycle.”

The Shanghai Composite Index lost 0.1% to 2,875.63 and Tokyo’s Nikkei 225 shed 0.4% to 20,597.21. Hong Kong’s Hang Seng declined 0.3% to 26,161.92.

Seoul’s Kospi gained 0.2% to 1,965.02 while Sydney’s S&P-ASX 200 fell 1% to 6,477.60. Taiwan and Indonesian markets advanced while New Zealand and Singapore retreated.

On Wall Street, the benchmark Standard & Poor’s 500 index snapped a three-day winning streak and fell 0.8% to 2,900.51. The Dow Jones Industrial Average slid 0.7% to 25,962.44. The Nasdaq composite dropped 0.7% to 7,948.56.

The U.S. market has been volatile this month as investors try to parse conflicting signals on the U.S. economy and determine whether a recession is on the horizon. A key concern is that the U.S.-Chinese tariff war will weigh on global economic growth.

Some chipmakers rose on Monday that the Trump administration

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Bursa edges lower amid cautious opening

Kuala Lumpur shares track overnight losses of global indices and investor caution to start the trading day slightly lower. — Picture by Razak Ghazali

KUALA LUMPUR, Aug 21 — Bursa Malaysia opened lower today tracking overnight losses of global indices amid cautious investment tone.

At 9.05am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) shed 2.83 points to 1,599.92, after opening 1.52 points lower at 1,601.24.

The market barometer closed at 1,602.75 yesterday.

On the broader market, losers outpaced gainer 112 to 87, while 146 counters unchanged, 1,610 untraded and 14 others suspended.

Turnover stood at 68.98 million units worth RM30.35 million.

Malacca Securities Sdn Bhd in its equity note today said, the FBM KLCI is expected to be on the road of recovery due to the oversold condition, despite weakening global indices.

“We do see some tempering of the recovery prospects and renewed volatility could still be a near term feature.

“Under the prevailing environment, we think the near term upsides could be limited with the 1,610 level becoming the near term resistance,” it said.

As for market rebound, it said that the lower liners and broader market shares will continue their rebound, but with increased volatility as profit-taking activities could set in.

“Nevertheless, we still see mild upsides over the near term as bouts of bargain hunting activities will provide some aiding factors,” it added.

Global indices, Dow Jones Industrial Average lost 0.66 per cent to 25,962.44, Japan Nikkei slid 0.68 per cent to 20.535.64, Hong Kong Hang Seng reduced 0.23 per cent to 26,231 and South Korea’s KOPSI fell 0.02 per cent to 1,959.80.

On heavyweight performance, Press Metal and Kuala Lumpur Kelong both declined six sen to RM4.75 and RM23.76 respectively, while Tenaga Nasional, CIMB Group and DIGI all shed two sen to RM13.68, RM5.16 and

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Market Ahead, August 21: All you need to know before the Opening Bell

Investors must brace themselves for another volatile trading session as global cues, rupee trajectory, and oil price movement are likely to steer market direction today

BS Web Team  |  New Delhi  Last Updated at August 21, 2019 08:29 IST

Investors must brace themselves for another volatile trading session as global cues, rupee trajectory, and oil price movement are likely to steer market direction today. Besides, expectations of any announcement for a stimulus package to revive the economy is likely to keep investors on the sidelines.

That apart, all eyes would be on the Reserve Bank of India’s minutes of the latest Monetary Policy meeting, which is scheduled to be released later in the day. Remember, the central bank lowered the repo rate by 35 basis points to 5.40 per cent during its August meeting.

Further, SEBI’s board will meet in Mumbai today during which it may introduce a slew of reforms, including greater checks on credit rating agencies and for rewarding informants in insider trading cases with up to Rs 1 crore reward, among other things.

Globally, US President Donald Trump said on Tuesday that he had to confront China over trade even if it caused short-term harm to the US economy.

On Tuesday, the S&P BSE Sensex ended at 37,328 level, down 0.2 per cent. The broader Nifty50, too, slipped 0.33 per cent, to settle at 11,017 mark.

And now, let’s take a look at the global

Financial shares dragged US stocks lower during the overnight trade on Tuesday. The Dow Jones and the Nasdaq fell 0.7% each while the S&P 500 lost 0.8%. In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2% during the early trade on Wednesday, while Japan’s Nikkei slipped 0.6%.

At 07:55 am, Nifty futures on the Singapore Exchange were trading 16.50 points lower

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Asian stocks follow Wall Street lower before US Fed release

BEIJING — Asia stock markets followed Wall Street lower Wednesday as investors looked ahead to a speech by the Federal Reserve chairman for signs of possible plans for more U.S. interest rate cuts.

Benchmarks in Tokyo, Shanghai and Australia declined while South Korea advanced.

U.S. stocks fell Tuesday after another slide in bond yields and a mixed batch of corporate earnings. Financial sector stocks led the declines.

Investors looked ahead to the Fed’s release Wednesday of notes from its policymaking meeting last month and a speech Friday by chairman Jerome Powell.

Markets have “entered a holding pattern” ahead of Powell’s speech at an annual gathering in Jackson Hole, Wyoming, said Jeffrey Halley of Oanda in a report.

Investors expect Powell to signal the Fed “is about to embark on a reinvigorated wave of easing,” said Halley. However, he said U.S. data “simply does not support the need for an aggressive easing cycle.”

The Shanghai Composite Index lost 0.1% to 2,875.63 and Tokyo’s Nikkei 225 shed 0.4% to 20,597.21. Hong Kong’s Hang Seng declined 0.3% to 26,161.92.

Seoul’s Kospi gained 0.2% to 1,965.02 while Sydney’s S&P-ASX 200 fell 1% to 6,477.60. Taiwan and Indonesian markets advanced while New Zealand and Singapore retreated.

On Wall Street, the benchmark Standard & Poor’s 500 index snapped a three-day winning streak and fell 0.8% to 2,900.51. The Dow Jones Industrial Average slid 0.7% to 25,962.44. The Nasdaq composite dropped 0.7% to 7,948.56.

The U.S. market has been volatile this month as investors try to parse conflicting signals on the U.S. economy and determine whether a recession is on the horizon. A key concern is that the U.S.-Chinese tariff war will weigh on global economic growth.

Some chipmakers rose on Monday that the Trump administration delayed enforcement of export curbs

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Bursa Malaysia opens lower amid cautious investment tone

KUALA LUMPUR: Bursa Malaysia opened lower today tracking overnight losses of global indices amid cautious investment tone.

At 9.05am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) shed 2.83 points to 1,599.92, after opening 1.52 points lower at 1,601.24.

The market barometer closed at 1,602.75 yesterday.

On the broader market, losers outpaced gainer 112 to 87, while 146 counters unchanged, 1,610 untraded and 14 others suspended.

Turnover stood at 68.98 million units worth RM30.35 million.

Malacca Securities Sdn Bhd in its equity note today said, the FBM KLCI is expected to be on the road of recovery due to the oversold condition, despite weakening global indices.

“We do see some tempering of the recovery prospects and renewed volatility could still be a near term feature.

“Under the prevailing environment, we think the near term upsides could be limited with the 1,610 level becoming the near term resistance,“ it said.

As for market rebound, it said that the lower liners and broader market shares will continue their rebound, but with increased volatility as profit-taking activities could set in.

“Nevertheless, we still see mild upsides over the near term as bouts of bargain hunting activities will provide some aiding factors,“ it added.

Global indices, Dow Jones Industrial Average lost 0.66% to 25,962.44, Japan Nikkei slid 0.68% to 20.535.64, Hong Kong Hang Seng reduced 0.23% to 26,231 and South Korea’s KOPSI fell 0.02% to 1,959.80.

On heavyweight performance, Press Metal and Kuala Lumpur Kelong both declined six sen to RM4.75 and RM23.76, respectively, while Tenaga Nasional, CIMB Group and DIGI all shed two sen to RM13.68, RM5.16 and RM5.00, respectively.

For the most active stocks, Sealink gained 2.5 sen to 29.5 sen, Brahims, Dagang Nexchange and Icon all added half-a-sen to 16.5 sen, 26 sen and 6 sen, respectively.

The FBM Ace gained

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Sensex, Nifty Set To Open On Tepid Note

Indian shares may open lower on Wednesday, with weak global cues, rising oil prices and a delay on the announcement of economic stimulus by the government likely to keep investors nervous.

Investors also await the release of the minutes of the Reserve Bank of India’s (RBI’s) August Monetary Policy meeting later in the day for clues to future interest rates.

Meanwhile, media reports suggest that market regulator SEBI is planning to introduce a slew of reforms, including greater checks on credit rating agencies and for rewarding informants in insider trading cases at a meeting scheduled later today in Mumbai.

Benchmark indexes Sensex and the Nifty ended modestly lower on Tuesday to snap a three-day winning streak amid news of financial irregularities in CG Power and Industrial Solutions. The rupee ended at over 6-month low of 71.71 against the U.S. dollar.

Asian stocks are trading lower this morning as trade tensions resurfaced and inversing bond yield spreads sparked fears of a global recession.

U.S. President Donald Trump said on Tuesday that he had to confront China over trade even if it caused short-term harm to the U.S. economy “because Beijing had been cheating Washington for decades”.

Surprisingly, the comments came hours before his government approved a major $8 billion sale of Lockheed Martin F-16 fighter jets to Taiwan, a move sure to draw Beijing’s ire.

The dollar fell against major currencies, helping gold rebound back above $1,500 an ounce. Brent crude futures rose above $60 a barrel for the first time in over a week after data showed a larger-than-expected drawdown in U.S. crude inventories.

U.S. stocks ended lower overnight to snap a three-session winning streak as lower Treasury yields weighed on financial stocks, offsetting Home Depot’s better-than-expected second-quarter earnings.

The Dow Jones Industrial Average and the tech-heavy Nasdaq Composite shed

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