TMC #12! Another week without ''regime change'': lower yields, tech > value, and the bond market ignoring a 5% CPI print. And don't miss my new, free product for you!
One possibility for lower short term rates - neg interest rates in US. (i.e) unforeseen jump back into deflation / stagnation required drastic measures !
Hi Alfonso, Could you please consider leaving a note as to what quadrant you believe we are currently in at the end of your trades or analysis? I was a transitional 70/30 equity/bonds investor most of my life until recently. As I get ready to retire I am trying to figure out why I would start "investing" more in bonds as they don't pay real interest at this point. Therefore I have been buying gold. The way I look at bonds currently is that they are only needed for collateral for commercial banks so they can have banks reserves to me LIBOR. I will keep reading your post. I am sure I am missing something...
I am not sure whether I understand this idea: "The private sector fixed income portfolios are now less skewed towards fixed income instruments and hence portfolio managers try to re-balance them by purchasing bonds: basically a loop."
Since bonds are fixed income instruments, why are managers rebalancing their portfolios by purchasing bonds if they are supposed to be less skewed towards fixed income?
So we've got European bonds on negative real yield and USTs on negative real yields (as measured by TIPS).
According to John Hussman and Jeremy Grantham many of the worlds equity markets have negative 7-12 year expected forward returns baked in via current high prices!
Cash is on negative real yield everywhere that I know of unless we get a true deflation event (not just reduced inflation).
MAIN QUESTION:
What is your view on whether the current asset inflation cycle will ever give way to risk aversion and severe price corrections in bonds and equities?
In relation to Chinese credit impulse and authorities reaction function, can we just monitor the USD/CNY rate for movements?
If I look at recent months it has been rather stable around 6.45. Does this suggest that US yield curve flattening led to similar moves in other bond markets (while the USD was strengthening or stable vs others)?
And does this imply no inflationary impacts from USD/CNY due to lack of movement? thanks much
Thanks always for your update. Last week Fed Chairman Powell alluded to the shortage of treasuries used as collateral. It looks like the Fed's reverse repo support is getting close to $1 trillion/day. Does this parallel the dynamics you see or how would affect the Bull flattening and drop in yields more on the long-end?
Great Update Alfonso. I would like to attend the weekly Q&A session, but I have not understand properly the subscription process. Which is the mail you are referring to? Grazie
One possibility for lower short term rates - neg interest rates in US. (i.e) unforeseen jump back into deflation / stagnation required drastic measures !
Hi Alfonso, Could you please consider leaving a note as to what quadrant you believe we are currently in at the end of your trades or analysis? I was a transitional 70/30 equity/bonds investor most of my life until recently. As I get ready to retire I am trying to figure out why I would start "investing" more in bonds as they don't pay real interest at this point. Therefore I have been buying gold. The way I look at bonds currently is that they are only needed for collateral for commercial banks so they can have banks reserves to me LIBOR. I will keep reading your post. I am sure I am missing something...
Hi Alfonso,
I am not sure whether I understand this idea: "The private sector fixed income portfolios are now less skewed towards fixed income instruments and hence portfolio managers try to re-balance them by purchasing bonds: basically a loop."
Since bonds are fixed income instruments, why are managers rebalancing their portfolios by purchasing bonds if they are supposed to be less skewed towards fixed income?
Thank you very much!
P.S.: Congratulations for your blog
Alfonso,
SETUP:
So we've got European bonds on negative real yield and USTs on negative real yields (as measured by TIPS).
According to John Hussman and Jeremy Grantham many of the worlds equity markets have negative 7-12 year expected forward returns baked in via current high prices!
Cash is on negative real yield everywhere that I know of unless we get a true deflation event (not just reduced inflation).
MAIN QUESTION:
What is your view on whether the current asset inflation cycle will ever give way to risk aversion and severe price corrections in bonds and equities?
Thanks for another great article.
In relation to Chinese credit impulse and authorities reaction function, can we just monitor the USD/CNY rate for movements?
If I look at recent months it has been rather stable around 6.45. Does this suggest that US yield curve flattening led to similar moves in other bond markets (while the USD was strengthening or stable vs others)?
And does this imply no inflationary impacts from USD/CNY due to lack of movement? thanks much
"yields dropping on a relative basis against EUR or USD yields have a significant impact on CNY/EUR and CNY/USD"
So if CB Yield drops does the CNY/USD CNY/EUR go down or up ? Down I think as China returns reduce
Also would you explain briefly the meaning of the Axis on the OIS Swap Curve as I am not sure how it feeds into the yield curve
For the bond allocation in your portfolio, why don't you use long term US treasuries? (IDTL etf)
It has more upside potential, if yields on the long bond get close to 0%.
Thanks always for your update. Last week Fed Chairman Powell alluded to the shortage of treasuries used as collateral. It looks like the Fed's reverse repo support is getting close to $1 trillion/day. Does this parallel the dynamics you see or how would affect the Bull flattening and drop in yields more on the long-end?
Great Update Alfonso. I would like to attend the weekly Q&A session, but I have not understand properly the subscription process. Which is the mail you are referring to? Grazie