Despite accommodative monetary policy via QE3, yields on U.S. Treasuries remained range bound where buyers and sellers were indecisive on the direction of the market. However, with the latest weakness in risk assets as market watchers point to uncertainty surrounding the Fiscal Cliff, yields have broken below this sideways trend in a flight-to-quality bid and may challenge the recent lows.
Articles written by: BondSquawk
By Rom Badilla, CFA, Bondsquawk As a follow up to yesterday’s article Stocks Further to Fall if Bond Yields Have Their Say, here is another tidbit of information that may keep the equity and other risk asset bulls up at night. According to Deutsche Bank, equity fund managers have lowered their exposure to risk assets on concern of the Fiscal Cliff. [...]
Despite massive amounts of federal and monetary stimulus and much to the chagrin of policy makers, the recovery following the financial crisis has been lackluster with modest gains in economic growth and in job creation.
Critics point out the tremendous amounts of debt and political dysfunction as major headwinds toward long term economic prosperity for the U.S. With massive amounts of debt incurred from two wars and the bailouts stemming from the financial crisis coupled with the lack of political will to address it, the U.S. faces an uphill battle in maintaining its position in the economic balance of power.
By Rom Badilla, CFA, Bondsquawk Fueled by a drop in hiring plans, sentiment by small businesses in the U.S. failed to increase in September which suggests stalling of improvements in both the labor markets and the economy. The National Federation of Independent Businesses released the results of its Small Business Optimism which fell by one tenth of a point to [...]
Several days ago, we talked about the Federal Reserve’s intent of improving financial conditions by way of balance sheet expansion and QE. Their recent policy action is generally supportive of risky assets such as corporate bonds and equities. Since the announcement, spreads and equities have performed as expected.
The start of the week featured two major economic data releases. The first release revealed that the U.S. economy is showing signs of weakness while the second release as a separate report showed that manufacturing in the Texas region improved in September.
High Yield Grade bond market has grown significantly for the past years at a rate close to 7%, and now amounts to a size of nearly $4.7 trillion. Looking at the issuance trends, the portion that non-financial issuer take in the overall issuance of the HG USD bonds has expanded since the credit crisis as shown in the graph below, while financial issuers have dramatically subdued their issuance of the HG bonds.
Earlier we talked about how earnings disappointments can leave corporate bonds vulnerable to underperforming. Despite the strong technical backdrop of the corporate bond market, the recent string of positive quarters for companies may be at risk due to results from second quarter earnings.
The Fiscal Cliff scheduled by the end of 2012 has been a central issue, more pertaining to Wall Street than to Main Street. However, as the presidential debate will center on the topic of the Fiscal Cliff, U.S. voters will soon turn their attention to the gravity of the issue that involves a combination of spending cuts and tax increases to reduce the federal budget by as much as $501 billion.