Our view is that it will be difficult for the Fed to take a dovish position with CPI above 7% given a CPI target of 2%. Further, the entire Treasury yield curve remains in negative territory. Recall that Powell wants to see positive real rates across the yield curve as he said in his September … Continue reading The Fed Can’t Afford To Be Dovish
Tag: yield curve
Why did Treasury Yields spike across the Yield curve from October 12th - October 20th? Look no further than the Fed's Balance Sheet. The Fed allowed $17.9 billion of Treasury Bills, Notes and Bonds to mature the week ended October 19th. Recall the Fed has dramatically shifted its strategy as it has transitioned from the … Continue reading QT Explains Treasury Yield Movements
The Fed will continue to hike interest rates for the foreseeable future. Macroeconomic and geopolitical risks are increasing. Therefore, yields can only move in one direction (Up), but this story won't have a happy ending like the Pixar movie of the same name. That is good news for high yield investors, good news for savers … Continue reading Yields Will March Higher
One element to consider when contemplating the forward yield curve and equity premiums is that the yield curve may settle at a level that is higher than what investors anticipate in the out years - say 2025 forward. P/E Multiples are behaving as if a zero percent Fed Funds Rate is the long-term norm, which … Continue reading Positive Real Yields
The Treasury yield curve continued to invert as short rates climbed higher and long rates fell. The 1-Year climbed to 3.14%, the 2-Year rose to 3.10% while the 7, 10, 20 and 30-Year Treasury yields all fell (see table below). The Treasury market is telling us that it expects a near-term recession by way of … Continue reading Yield Curve Inversion Implies Near-Term Risk
10-year Treasury yields sit around 2.72% and will climb higher as the Fed: a.) lifts the Fed Funds Rate and, b.) trims its balance sheet (i.e. quantitative tightening "QT"). There is no scenario in which the Fed executes QT only to have Treasury yields move lower. It is simply a question of supply and demand. … Continue reading Treasury Yields Will Only Move In One Direction
Speaking of a flattening of the yield curve, spreads between the 5 and 30-year Treasuries have not been this narrow since June 2007 (see chart below). Reach us at firstname.lastname@example.org if you would like the Excel data behind the chart. Source: Treasury.gov; TEK2day.com. Click chart to expand.
Insurance company CIOs continue to use Alternative Assets to increase yield in this ultra-low interest rate environment. KKR Asset Management's Insurance CIO survey found similar results (chart below) to our recent TEK2day Spotlight report on the insurance industry which may be accessed HERE. We expect that the heavy use of Alternative Assets in the pursuit … Continue reading Leveraging Alternative Assets To Increase Yield
We reviewed the 592 page Biden COVID Relief / Stimulus bill which recently became law. Our breakdown includes the nine primary spend categories and related subcategories as presented in the bill. Needless to say this is a massive debt-funded fiscal spending program at a time when Debt to GDP is at a record level. The … Continue reading A Breakdown of Biden’s Debt-Funded COVID Relief Program
We have said it on our TEK2day Podcast and in conversations with some of you that the Fed's next move is to accelerate its QE effort to control long bond yields. This may occur as soon as this month. An interest rate hike is not coming this year in our view. There is far too … Continue reading The Fed’s Next Move Is To Ramp QE, Not Raise Rates.