In ~11 years writing this blog – I’ve never seen a move in bond markets like the past 24 months. 10-year yields traded below 0.5% not that long ago. Money was next to free. Now that instrument will return 4.25% risk free. The 12-month T-Bill is a very attractive 5.34%. But it’s not just in the US – it’s global. Germany, Australia, Japan and the UK… yields on major fixed-income benchmarks are moving higher. In the UK, the 10-year gilt is yielding its most in 15 years. For me, where the market goes is more about bond yields than what the Fed do next…
"Interest Rates / Bonds"
The One Chart that Matters Most
If you were asked what is the most important metric in global finance – what would you answer be? The S&P 500? The US Dollar? Gold Something else? My answer is the US 10-year yield. Everything in finance is a function of this asset. For those less familiar with the game of asset speculation – this is a very important concept to understand. What’s more, its importance extends well beyond the stock market. To begin, the US 10-year yield is the proxy for financial instruments such as your mortgage, your car loan, student debt, your credit card etc. More than that – how this bond trades also signals investor confidence.
Buffett is Buying Bonds
Warren Buffett is pouring tens of billions of Berkshire money into short and longer-term bonds. And I’m not surprised… For e.g., Jul 9th I offered this post “Think About Adding Bonds”. Shorter-term bills were offering investors ~5.50% and the longer-date 10-year bond above 4.0%. That’s attractive for a number of reasons… this post explains why.
Will a US Debt Downgrade be a ‘Bearish’ Catalyst?
Earlier this week, Fitch Ratings downgraded the U.S.’ credit rating. Stocks slipped a little on the news and bond yields ticked higher. The US 10-year treasury yield is now north of 4.10%. Fitch cited “expected fiscal deterioration over the next three years” and an erosion of governance. Hard to argue. Fiscal restraint is not one of the government’s strengths. But this isn’t entirely new news. For example, the credit agency placed the nation’s rating on watch in May following a near-default after members of Congress butted heads over raising the debt ceiling. However, this put the wheels in motion….
For a full list of posts from 2017…