Alexander Gloy’s Post

Great article from The Wall Street Journal! The current forward yield curve is likely too conservative. If history proves out, rates should drop at a much faster rate than the "dot plot" forecasts. The Fed is using its words instead of rate cuts to manipulate the market. Blindly following the yield curve while investing is subscribing to pack mentality and will lead to mediocre investment performance. #federalreserve #herdmentality #DontBeASheep #investing

BofA’s Warning of a ‘5% World’ Sinks in With Yields Pushing Higher : inflation could remain stubbornly above the Fed’s target, leaving room for long-term yields to push even higher : prompted a rethink of what “normal” in the Treasury market will look like Bank of America Corp., strategists are warning investors to brace for the return of the “5% world” that prevailed before the global financial crisis ushered in a long era of near-zero US rates : BlackRock’s Boivin sees ‘remarkable repricing’ in longest debt “There is a remarkable repricing higher in longer-term rates” Market eyes inflation risk as economy defies recession calls “This has been flipped now” “So even if the long-term neutral rate is not changed, central banks will hold policy above that neutral rate to stave off inflationary pressure”

Question! why the #yieldcurve isn't signaling #recession : #USeconomy The yield curve — the difference between yields of 10- and two-year #USTreasuries — has long been seen as as #recession predictor: When investors are fearful, they tend to buy up 10-year Treasuries, causing the yield to fall below the #interestrate of shorter-term securities. But that's not happening now. Longer-term #Treasury yields have risen, as #financial markets price in a lower chance of recession. “Unbelievably resilient is the way I would characterize the #USeconomy,” When it comes to the #yield curve, it's not so much that 10-year yields are low — they've climbed to around 4.5%. Rather it's that the #FederalReserve's policy rate is relatively high. In an effort to tamp down #inflation, the central bank has ratcheted up its target rate to 5.25%-5.5%. #Bond investors, meanwhile, likely expect the central bank's #policy rate to eventually go back to a more neutral, long-term rate of around 3.5% as inflation cools in the coming years. “People believe that will mean revert over time,” #US #stockmarket

[FED CUTS COMING SOON?] In his latest speech, Federal Reserve Board Chair Jerome Powell expressed concern that holding interest rates too high for too long could jeopardize economic growth. Setting the stage for a two-day appearance on Capitol Hill this week, the central bank leader said that the economy and labour market have stayed strong despite recent cooling. On this episode of US Markets Wrap, Laila Pence, President & Co-Founder, Pence Wealth Management weighs in on how long is too long, the scale of rate cuts we might see in the coming months; whether a lack of market breadth kept the S&P 500′s gains in check; if we're seeing central bank divergence currently; as well as her top conviction calls. Catch the podcast here: https://lnkd.in/gAPJ4XA5 #USMarkets #markets #investing #Fed #ratecuts #interestrates

Very interesting movement coming up over the next 2 quarters.

PIMCO | 𝗬𝗶𝗲𝗹𝗱 𝗔𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲 👇 - "The global economy continues to recover from pandemic aftershocks" - "Disinflation has occurred more rapidly than anticipated in most DM economies" - "Central banks are also poised to pivot toward rate cuts, likely on different schedules" - "Large-scale fiscal stimulus has fueled recent standout U.S. growth, but that exceptionalism has come at a cost" - "Equities screen expensive on an absolute basis and relative to U.S. Treasuries" #inflation #growth #interestrates #fixedincome #bonds

The conversation amongst investors is shifting to potential rate cuts in 2024. Thanks to Sam Goldfarb for including my comments in his latest The Wall Street Journal piece. I talked to him about what investors may be pricing in, i.e. a recession versus a more benign low inflation environment that doesn’t require tight monetary policy (and the Fed could do a few insurance cuts if there are economic air pockets) https://lnkd.in/gbGgAjY7

What is yield curve control? The yield curve in a healthy economy slopes upward, as investors angle for a high rate when purchasing long-term bonds. Yield curve gives a central bank the ability to manipulate the economy, particularly in times of economic distress, by targeting specific rates that maintain an upward slope. Yield curve control may offer one way to stimulate the economy. With targeted rates on extended interest rates, there may be less risk of an economic recession. Even when recessions occur, these rates may soften the blow.   Learn more: https://lnkd.in/gtDszbT #financialplanning #investmentstrategies #stablefordcapital

Sticky inflation and robust economic data have helped central banks cement a “higher for longer” narrative on rates. However, we see opportunities emerging in government bonds as tightening cycles mature and corporate bond yields also look attractive given the resilience of credit fundamentals. Key takeaways: - We believe the versatility and higher yields of fixed income make it a potentially attractive option in this transitional period for markets. - With the Fed’s hiking cycle maturing and recession still a risk, we think US Treasuries look good value in the belly of the curve. - We think investors can find opportunities in emerging markets and Asian bond markets, where the growth and inflation outlook is more positive than in developed markets. - At a company level we see continued resilience from investment grade issuers, though after recent spread rallies we think single name selection should be prioritised in high yield. By Franck Dixmier, Global Chief Investment Officer Fixed Income at #AllianzGlobalInvestors #NavigatingRates #inflation #bonds #yield #FixedIncomeQuarterly

For 15 months now, the yield curve has been inverted. In English, that means 10-year Treasury bonds have been yielding less than two-year bonds, even though investors normally require an extra yield for the extra risk for investing over long periods. As is now widely known, an inverted curve is one of the strongest recession indicators there is. An inversion so protracted implies serious problems afoot. The spike in bond yields over the last few weeks, however, has been accompanied by a swift dis-inversion. The curve was inverted by 107.5 basis points (meaning that two-year exceeded 10-year yields by this much), as recently as July. Now that number has dropped to 31.7 basis points, the least inverted curve in almost 12 months: And this is a shame, because the yield curve tends to dis-invert when the recession is about to start. The intuition behind why this might be is that when a downturn is clearly imminent, central banks begin to cut rates, bringing down shorter-dated bonds.