[ad_1]
Recently, investors in US bonds have scared the financial markets by demanding a higher premium on short-term government bonds compared to longer-term bonds.
<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Specifically, the yield on the 10-year Treasury note is fell below the 3-month Treasury bill yield increase for the first time since 2006. Nicknamed the & nbsp;reversal of the yield curve,& nbsp; the phenomenon often suggests a recession. "data-reactid =" 16 "> Specifically, the 10-year Treasury bond yield has fallen below the three-month Treasury bond yield increase for the first time since 2006. Nicknamed the curve reversal yield , the phenomenon often bodes of recession.
<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "On a background of & nbsp;easing the global economy,& nbsp; the inversion has put Wall Street to the test. However, a growing number of observers have a message to send to the markets: Relax. "Data-reactid =" 17 "> In a context of slowdown in the global economy, the inversion has worried Wall Street.However, a growing number of observers have a message for the markets: Relax -you.
A premium on short-term rates "is an important phenomenon and it should not be ignored, but from our point of view, the level of rates is more important than the shape of the curve," said Krishna Memani , CIO of OppenheimerFunds, which has more than $ 229 billion in assets under management.
Despite the Federal Reserve's rate hike campaign that ended in December, its relatively loose policy has kept the general level of rates low for most of the past decade and continues to be the norm. to be "more favorable than ever for a long time". ," he added.
<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Monday, the former president of the Federal Reserve & nbsp;Janet Yellen said the rise in short-term rates was not a sign of recession"Data-reactid =" 20 "> On Monday, former US Federal Reserve Chairman Janet Yellen said the short-term rate hike was not a sign of a recession, but could suggest an upcoming interest rate cut by the Fed.
"The market is showing signs and investors are buying their debt in the medium term," said Andrew Szczurowski, portfolio manager and vice president at Eaton Vance, which manages a state-owned debt fund. worth $ 4 billion.
Given the fact that the Treasury Curve has stabilized for several years due to quantitative easing by the Fed, "this period is different for a number of reasons," said Szczurowski. "The market is a little ahead of itself."
JPMorgan analyst Marko Kolanovic also acknowledges that this period is different, noting that the yield on the 10-year note was "artificially kept down by zero or negative returns outside of the significant QE activity in the US. United States and operations performed.
<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = ""Make people afraid by making mistakes""data-reactid =" 24 ">"Make people afraid by making mistakes"
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Meanwhile, opinions differ sharply on the exact segment Goldman Sachs analysts said on Tuesday that investors should not use the 3-month / 10-year bond yield as a recession indicator, but instead of & nbsp;look at the differential 2 years / 10 years. Goldman Sachs analysts said on Tuesday that Goldman Sachs analysts should not use the 3 monthly / 10-year yield as a tonnage of recession, but should rather take into account the 2-year differential. 10 years.
Brian Belski, chief strategist of the Bank of Montreal, confirmed this argument by explaining that the recent gap between short-term and long-term returns "has led to a lot of speculation and diatribes" from market watchers who " scare people for false information and analysis. "
<p class = "canvas-canvas-text canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Part of the anxiety was appeased on Tuesday , when Government auctions, which lasted two years, were welcomed with & nbsp;strong demand from investors, Data-reactid = "27"> Part of the anguish was appeased Tuesday, when the two-year government bid was greeted by strong investor demand, driving up prices upward . short-term paper and lower yields.
Belski argued that the differential between 2 and 10 years is still positive and historically very optimistic for equity investors.
<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "" We believe that investors should not start Belski also cited data showing that the annualized returns of the S & P 500 (^ GSPC) "we think that investors should not worry if the yield curve does not reverse and until this yield curve is reversed", he declares. Belski also cited data showing that the annualized returns of the S & P 500 (^ GSPC) averaged more than 12% as yields flattened.
Even if short-term investors are nervous about the economy, an inverted curve does not suggest an "imminent catastrophe for equities," said the analyst, noting that the lag between reversal and slowdown usually extends over a period of at least one year.
The mitigating factor in any slowdown is the Fed. Some argue that the central bank could be forced to cut rates this year if the economic slowdown turns into a ditch.
"The goal of the fed is to minimize economic losses," said Memani, of OppenheimerFunds.
"This concern is much more acute today than it was in the 1990s and 2000s because they recognized that if the economy went into recession, their tools would be considerably more limited than before, "he said. "To a large extent, the pivot of December and the capitulation of January [on hiking rates further] was a politics motivated by this fear. "
–
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Javier David is editor for Yahoo Finance. Read more:"data-reactid =" 35 ">Javier David is editor for Yahoo Finance. Read more:
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Follow Javier on Twitter: @TeflonGeek"data-reactid =" 41 ">Follow Javier on Twitter: @TeflonGeek
[ad_2]
Source link