Free Republic

Is it a bond market crisis — or not? That is the question many investors are pondering at this moment of worrying moves. "I wouldn't say it's a crisis," Charles Schwab (SCHW) chief fixed income strategist Kathy Jones told Yahoo Finance Executive Editor Brian Sozzi on Yahoo Finance's Opening Bid podcast (see the video above or listen below). "It's just different [this time]." Jones has been closely studying the bond market for years, with a résumé that includes stints with Morgan Stanley (MS) and Citigroup (C). She has been at Charles Schwab for nearly 15 years. During her tenure, markets...

While President Trump projected confidence, the White House was haunted during the latest round of tariff turmoil by the possibility of a “bond market death spiral.” Having worked as a venture capitalist before entering politics, Vice President J.D. Vance had previously regarded the phenomenon as one of his greatest concerns. A plunging stock market took center stage, but it was another sell-off that alarmed Wall Street. Ahead of the tariff deluge, investors offloaded government securities, sending the yield on Treasury bonds ever higher. Amidst the trade uncertainty, the 10-year Treasury bond climbed to 4.51% while the 30-year hit 5% –...

The bond sell-off escalated Friday to cap off one of the most volatile and unusual trading weeks in recent memory as President Trump's tariff whipsaw sent yields surging and stocks plummeting.Long-term Treasury yields ripped higher, with the 10-year yield (^TNX) surging to its highest level since February to trade at around 4.53%, a massive 66 basis point swing from Monday's low of 3.87%.According to data compiled by Yahoo Finance, the 10-year has logged its biggest week since November 2021.Similarly, the 30-year yield (^TYX) jumped 7 basis points to trade near 4.92% — the highest level since January but the biggest...

U.S. Treasuries are now outperforming stocks since Donald Trump was elected President, and some strategists say there’s room for those gains to run. A Bloomberg gauge of U.S. sovereign debt has returned 2.1 per cent since the Nov. 5 vote, beating a gain of 1.6 per cent from the S&P 500 index including reinvested dividends. While long-end Treasuries declined on Tuesday after Trump imposed new 25 per cent trade tariffs on Canada and Mexico, the prospect of further Federal Reserve interest-rate cuts is seen giving bonds a further tailwind. Stocks meanwhile are being sold, as the outlook for global growth...

Last month, in an interview with Tucker Carlson, J.D. Vance said he worried about the U.S. government bond market in the early stages of a Trump presidency. Because of Biden-Harris spending, the U.S. is adding about $2 trillion to the national debt every year, he said, and “The only thing that makes that serviceable is that interest rates are still pretty low.” If interest rates go much higher, say to 8 percent, “that can become a huge spiral that could take down the finances of this country.” Vance said that international investors and foreign countries — beneficiaries of globalization —...

After experiencing its worst crash yesterday since Black Monday in 1987, Japan’s stock market has all but recovered, rising by more than 10 percent today — its biggest single-day gains in history. Nearly all markets in Asia are on the up. But while the FTSE 100 looked set for a rebound, stocks continue to slump today as worries about the US economy intensify. We’re still in the thick of the turbulence. The dust hasn’t settledOverall it’s been a miserable couple of days for investors. All eyes were on Wall Street’s opening this morning, with particular attention…After experiencing its worst crash...

The Treasury-bond rout that's rattled US markets this month is forcing investors to zero in on the government's spiraling debt. The accelerated increase in America's indebtedness has already sparked concern for investors in 2023, with lawmakers only narrowly avoiding a catastrophic default in June thanks to President Joe Biden and then-House Speaker Kevin McCarthy brokering an 11th-hour deal to raise the federal borrowing limit. Now, some of Wall Street's best-known names are raising the possibility that so-called "bond vigilantes" – who dump fixed-income assets in a bid to stymie what they see as imprudent policymaking – have helped fuel the...

US 10-year yields are rising at a rapid pace. US 10-year yields have risen to 4.70% from 4.0% since early August. The moves have come despite stable market-measured inflation and Fed expectations. Aside from some moderate underlying strength, there haven't been any big economic surprises either. The scariest part about it is that there's no good explanation for why it's happening.Lately, there's been some hope that it was quarter-end or some kind of one-off puke but with two auctions missing this week (including today), it's increasingly clear that real-money demand just isn't there. There are scenarios where this blowout isn't...

Michael Pento discussed the current state of the bond market and warned of the potential collapse of the US dollar due to the erosion of faith in the world’s reserve currency. He advised investors to sell long duration bond exposure and invest in short term US government debt. Pento also discussed the inflation and GDP acceleration, as well as China and Japan’s selling of US treasuries. He warned of the massive issuance and supply of US debt and questioned who will buy it, as the Federal Reserve is no longer buying and is instead selling their balance sheet, adding to...

Underlying strength in the bond market is signaling that the US economy is not on the verge of entering a recession anytime soon, according to a Monday note from DataTrek Research. In fact, corporate bond-yield spreads relative to US Treasuries suggest the economy is not going to enter a recession in 2023 or 2024, according to the note.

MARKET EXTRA The Federal Reserve on Friday confirmed what many investors were saying for some time: the $24 trillion Treasury market has been experiencing low levels of market liquidity in recent months. The central bank has been rapidly increasing interest rates since March as part of a fight to bring inflation down from a 40-year high. The hope has been that such steps can cool consumer demand enough to tame prices, without throwing the economy into a painful recession, or spark a financial crisis. But since May, cracks in liquidity in Treasurys, the biggest, deepest part of the U.S. bond...

<p>Profits and losses aren’t usually thought of as a consideration for central banks, but rapidly mounting red ink at the Federal Reserve and many peers risks becoming more than just an accounting oddity.</p><p>The bond market is enduring its worst selloff in a generation, triggered by high inflation and the aggressive interest-rate hikes that central banks are implementing. Falling bond prices, in turn, mean paper losses on the massive holdings that the Fed and others accumulated during their rescue efforts in recent years.</p>

As The Federal Reserve tries to drain-off the extraordinary growth in its balance sheet since COVID without raising its target rate (good luck with that!), it is time to appraise where we are sitting. First, liquidity. Let’s look at the ongoing saga of Chinese conglomerate Evergrande (mainly known as a large real estate developer). Their 8.25% bond has plunged to $23.481 on speculation of a catastrophic default on their bond payments. Then we have Invesco’s Golden Dragon China ETF (measuring a diversified market cap of US-listed companies headquartered or incorporated in China & derive a majority of their revenues from...

The price index tracking consumer spending — the PCE price index — was up 4.3% over the 12 months ending in August. That was a faster pace than July's 4.2%. Inflation continued to run at the fastest pace since January 1991. The PCE inflation gauge is one of many, and they're not all pointing in the same direction: The consumer price inflation index came off a 13-year high in August, for example. But the PCE index is the Federal Reserve's preferred measure of inflation. Although prices rose sharply, American incomes increased at only a modest pace, up 0.2% or $35.5...

This isn’t as much hyperbole as it sounds: the main reason investors bought bonds issued by Chinese state-backed companies is an implicit guarantee from default by the local or provincial government. That belief has been shattered by a recent spate of defaults by major Chinese state-owned companies. Yongcheng Coal and Electricity Holding Group, a state-owned coal company, defaulted on a $152m bond in November. At the time of the default, Yongcheng was a AAA-rated company by Chinese domestic credit rating agencies. This became, pun unintended, the proverbial canary in the coal mine. Shortly thereafter, Tsinghua Unigroup, a state-backed technology company...

With US Treasury yields capped around 0.90% amid concerns that in the absence of fiscal stimulus the Fed will need to step in with more easing (either in the form of extending QE maturities, or an outright expansion in QE), China is facing a different set of challenges and following the recent rout in the bond market following several unprecedented SOE defaults, overnight the Chinese 10Y yield rose another 2bps to 3.36%, and almost 90bps from the all time low of 2.48% hit in April.As a result, the premium for China’s 10-year government bonds over U.S. Treasuries of same duration...

The Fed announced Tuesday morning that it would be establishing a repurchase agreement facility for foreign and international monetary authorities (FIMA) that have accounts at the central bank’s New York branch. Through the FIMA repo facility, other central banks and monetary authorities unable to make smooth trades in the open market will be able to temporarily liquidate their positions in Treasuries.

Support for critical market functioning. The Federal Open Market Committee (FOMC) will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy. The FOMC had previously announced it would purchase at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities. In addition, the FOMC will include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases. Supporting the flow of credit to employers, consumers, and businesses by establishing new programs that, taken together, will...

What are negative interest rates? A negative interest rate is exactly how it sounds — it’s when an interest rate (or a yield) falls below 0 percent. It seems counterintuitive. After all, how can a rate actually fall below zero, a number that’s literally meant to be a floor for traditional borrowing and lending activities? Take Germany, for example. Its government bond yields are trading in the negative territory all the way out to 20 years. Bond yields are negative in France, Denmark and the Netherlands right now, and they were once sub-zero in Belgium. The Riksbank of Sweden, the...

The Federal Reserve, saying “the coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” cut interest rates to zero on Sunday and launched a massive $700 billion quantitative easing program to shelter the economy from the effects of the virus. Facing highly disrupted financial markets, the Fed also slashed the rate of emergency lending at the discount window for banks by 125 bps to 0.25%, and lengthened the term of loans to 90 days. The Fed also cut reserve requirement ratios for thousands of banks to zero. In addition, in a global coordinated...