Should The Fed Be Above Criticism?

I suppose it was just a matter of time, but Trump Derangement Syndrome (TDS) finally hit the bond market last week.

According to some experts, last week’s nearly 10 basis point jump in long-term Treasury bond yields was at least partially due to the president’s unprecedented and impertinent statement that he didn’t like the fact that the Federal Reserve was raising interest rates.

For the past two years, the financial markets have been an island of blissful ignorance, totally disregarding all of the nonsense swirling around the White House, whether real or invented. The S&P 500 has risen about 30% since Donald Trump’s election despite all of the clouds hanging over his presidency, from alleged collusion with the Russians to the Paul Manafort thing to Stormy Daniels to surrendering American sovereignty to Vladimir Putin.

But now apparently the president has finally stepped in it deep enough to rattle the markets.

Last week the yield on the benchmark 10-year Treasury note rose seven basis points to close the week just below 2.90%, its highest weekly close in a month. The yield on the 30-year bond jumped 10 bps to 3.03%, its highest level since June 26. According to the Wall Street Journal, some of that rise was due to Trump’s comments about Fed policy, neglecting to mention that the yield on the 10-year German government note – the European benchmark – was also up sharply last week, up nine bps on the week to 0.37%, its highest level since June 20.

So what did Trump say about the Fed that was so disturbing that it led some bondholders and traders to dump Treasury bonds and German Bunds? Continue reading "Should The Fed Be Above Criticism?"

Don't Bet On Crises To Keep Bond Rates Lower

Despite the recent dip in the 10-year Treasury note yield back below 3%, don’t count on it staying there. Lately, it seems, the only thing keeping the rate below that level is some sort of international crisis – Italy, North Korea, trade wars, etc. But the basic fundamentals determining that rate – economic growth and supply and demand, in other words – are calling for even higher rates, well above 3%.

On the supply side, more Treasury debt is coming to market all the time, like an incoming tide in the Pacific Ocean. On the demand side, there are fewer buyers – and I mean big buyers. More about that in a minute. At the same time, the economy is growing stronger, which by itself is going to put upward pressure on rates.

In other words, if you’re betting that the 10-year yield is going lower, or will stay around or below 3%, you’re really only holding it as a safe haven. Nothing wrong with that, lots of investors do that. But if you’re hoping to profit when something in the world goes wrong, you may be playing a losing game.

First the economy. Last week on CNBC’s Squawk Box, the gold dust twins, Warren Buffett and Jamie Dimon, tried to outdo themselves in how great the U.S. economy is performing. Continue reading "Don't Bet On Crises To Keep Bond Rates Lower"

Uncle Sam's Bargain Bonds

George Yacik - INO.com Contributor - Fed & Interest Rates - Uncle Sam's Bargain Bonds


According to a widely reprinted and circulated report in the Wall Street Journal, for the first time since 2000, U.S. government bonds now yield more than all of their developed world counterparts. Looking just at the 10-year security, the yield on the benchmark Treasury note now yields more compared to a record number of countries, and the yield differential between the U.S. government note and its German bund counterpart is its widest in almost 30 years.

Basically, this means that the arguably safest investment available anywhere in the world – the one American business schools still hold up as a “riskless” benchmark – yields way more than most other sovereign debt, including Italy’s, Canada’s and Australia’s – but no, not Greece’s, although they’re not too far off.

Let’s look at the numbers. Continue reading "Uncle Sam's Bargain Bonds"

That Elusive 3 Percent Yield

George Yacik - INO.com Contributor - Fed & Interest Rates - 3 Percent Yield


On Wednesday morning, the yield on the benchmark 10-year Treasury note moved back over 3%. In just the past five years, though, that has only happened twice before, but then only for a day or so. Is this the time the yield breaks 3% and stays there?

The most recent time before Wednesday, of course, was just two weeks ago. On April 24 the yield moved a hair above 3.0%%, then hit 3.03% the next day. It then quickly retreated below the magic number and hasn’t gone above it until now.

Before then, the last time the yield hit 3% – and I mean just – was at the very end of 2013 and the very beginning of 2014. It hovered right at 3% for a few days and then subsequently dropped sharply, eventually falling to well below 2.0% over the next year. The last time the note has been comfortably over 3% and remained there, was back in the summer of 2011.

What is it about that 3% mark that fixates investors – or rather, attracts them? Just like in 2013, that 3% figure seems to serve as a buy signal for investors.

Are they making a mistake? Is it really a buying opportunity, or just a bond market head fake? Continue reading "That Elusive 3 Percent Yield"

Interest Rates On The Rise

Hello traders everywhere. The 10-year U.S. Treasury yield has risen above 3% for the first time since January of 2014, signaling that higher interest rates are ahead for the U.S. bond market as the Federal Reserve is intent on boosting interest rates after keeping them at historically low levels for some time. The yield, the benchmark for everything from U.S. mortgages to dollar bonds in developing nations, climbed as high as 3.0014% in morning trading, before slipping back below 3% to 2.979% in the early afternoon.

As the 10-year yield broke three percent the stock market turned lower with the DOW losing over 1% on the day with the S&P 500 losing .80% and the NASDAQ falling 1.4% as tech is posting heavy losses.

Interest Rates Rise

Speaking of tech, the FAANG stocks are all lower on the day with Alphabet leading the way. Alphabet (Google) is posting a loss of over 4.5% on the day after reporting earnings where they made a lot of money, but investors are worried about rising expenses.

The other FAANG members are posting steep losses as well. Facebook declined 3.4%, Amazon 3.8%, Netflix declined 4.2% and Apple is losing just a tad over 1% on the day.

Key Levels To Watch This Week:

S&P 500 (CME:SP500): 2,553.80
Dow (INDEX:DJI): 23,344.52
NASDAQ (NASDAQ:COMP): 6,805.90
Gold (NYMEX:GC.M18.E): 1,337.60
Crude Oil (NYMEX:CL.M18.E): 67.14
U.S. Dollar (NYBOT:DX.M18.E): 88.94
Bitcoin (CME:BRTI): 6,616.14

Every Success,
Jeremy Lutz
INO.com and MarketClub.com