Tag: us treasury bond yields

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Market News Top Global News

Bitcoin Hits $60,000 Again – Top International News

Money Moving Into Fundamentally Strong Stocks as Treasury Bonds Decline

U.S markets are consolidating after a 0.25-0.45% gap-up opening. Investors and traders are slowly moving to strong stocks after the unexpected increase in retail sales and corporate earnings.

The S&P 500 is having the best week since July end, led by industrial and financial shares. Alcoa, the biggest U.S. aluminum producer, rose nearly 15% after announcing its first dividend since 2016. 

  • Stoxx Europe is up by 0.73%
  • Dow Jones is up by 0.80%
  • NASDAQ is up by 0.28%

Bitcoin Hits $60,000, First Time in Six Months 

Crypto king Bitcoin on Friday hit the $60,000 level for the first time in six months on expectations of the first U.S. ETF for the coin. Investors are expecting that U.S. regulators would allow a futures-based Exchange-Traded Fund (ETF) next week, and it has been fueling the recent rally for many days. At the time of writing, Bitcoin is consolidating just below the $60k level. Its value has doubled in the last 3 months. Let’s see how it will react to the all-time high at $64,895, which was hit in April 2021.

Alcoa Rises On Higher Aluminum Pricing and Strong Q3 Results

The shares of aluminum supplier Alcoa rose nearly 15% on Friday in NYSE after it posted solid Q3 results. The global rise in aluminum prices has also boosted the jump. The earnings per share (EPS) were reported at $2.05, above estimates by 20 cents and the revenue grew 31.5% to $3.11 billion. It also announced a new 10-cent quarterly dividend and a $500-million buyback program.

U.S. To Open Borders to Vaccinated Foreign Travelers On Nov 8

The U.S. government has decided to allow vaccinated foreigners to enter from November 8, a great relief for thousands of people. Foreign nationals coming directly from countries including Europe, India, Brazil, and China have been restricted from entering the U.S border since the beginning of the Covid-19 pandemic. Vaccinated individuals who have a negative test result will now be allowed to board a flight to the U.S.

U.S. Retail Sales Jump Unexpectedly

The Commerce Department stated that September retail sales rose to a seasonally adjusted 0.7% compared to August, as Americans started to spend more on goods. Excluding automobiles, sales advanced 0.8% in September, and the August retail sales were revised up to 0.9% from 0.7%. Analysts were expecting lesser sales due to supply disruptions.

It’s controllable: China’s central bank in first statement on Evergrande debt crisis

In a first public statement on the Evergrande debt crisis, China’s central bank said the spillover effect on the banking system is controllable, and individual financial institutions’ risk exposures are not big. Chinese authorities are urging Evergrande to step up asset disposals and the resumption of projects.

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Market News Top 10 News Top Global News

Traders Brace for Inflation as Bond Yields Overshoot – Top 10 Global News

1. Nasdaq Futures Slide With Bonds on Inflation Risks

Inflation concerns are rattling investors once again, fueling a selloff in U.S. bonds and sending Nasdaq futures sharply lower. Ten-year Treasury yields climbed above 1.7% for the first time since January 2020, and the 30-year rate topped 2.4%. The Nasdaq 100 Index, a benchmark for high-valuation stocks that are sensitive to rising yields, sank more than 1%. U.S. equities look poised to reverse some of the gains from Wednesday when markets hit an all-time high. The Federal Reserve’s apparent willingness to keep pumping support into the economy and let it run hotter has spurred bets on faster growth and inflation.

Futures on the S&P 500 Index decreased 0.3% as of 6:45 a.m. New York time.

The Stoxx Europe 600 Index increased by 0.4%.

The MSCI Asia Pacific Index rose 0.8%.

The MSCI Emerging Market Index gained 0.6%.

2. Treasury Rout Deepens as Traders Brace for Inflation Overshoot

Treasury yields breached more key levels as bond traders boosted bets that the Federal Reserve will allow inflation to overshoot as the U.S. economy recovers. Yields on the benchmark 10-year bond climbed as much as 11 basis points to 1.75% — the highest since January 2020, while the 30-year breached 2.5% for the first time since August 2019. Market measures of inflation expectations are now trading near multi-year highs, with traders paring back bets the Fed would start tightening as soon as late next year. The dollar rebounded against its major peers. Rates have surged this year on expectations that stimulus spending and vaccine rollouts will fuel a sharper economic recovery and a pick up in inflation.

3. Biden to Reach 100 Million Vaccinations Goal Six Weeks Early

President Joe Biden is poised to meet his goal of delivering 100 million Covid-19 vaccine shots in his first 100 days in office as soon as Thursday, reaching the milestone more than a month ahead of time. As of Wednesday, his 57th day in office, the U.S. had vaccinated nearly 98 million people since Biden’s inauguration. The pace of shots has risen to an average of nearly 2.5 million per day for the last week. That leaves Biden within the grasp of his target on Thursday — the 58th day of his presidency — and poised to hit it no later than Friday, barring a major slowdown. With the pace continuing to accelerate, Biden is actually on course to double his goal and see 200 million shots by his 100th day as president.

4. Value Stocks a Week Away From ‘Miracle’ Momentum Boost

Value stocks are morphing into their once-feared momentum rivals, a shift that could accelerate in coming weeks and give their rally a fresh boost. Next Tuesday marks the 12-month anniversary of the MSCI AC World Value Index’s eight-year low, a key timeframe that many quantitative models use to screen for momentum shares to buy. Biden’s victory and his immediate calls for further stimulus sent investors rushing to buy stocks exposed to a jump-started economy and the prospect of rising inflation. That meant a switch to long-overlooked value shares such as those in the financials, energy and industrials sectors and away from high-priced technology stocks, which had dominated momentum investing for most of the last decade.

5. Top China Chipmaker Gets State Funds for $2.4 Billion Plant

Semiconductor Manufacturing International Corp. will build a $2.35 billion plant with funding from the government of Shenzhen, the first major project to emerge from China’s masterplan to match the U.S. and become more self-reliant as the global chip supply dwindles. SMIC on Thursday warned that shortages could worsen this year and next and wallop Chinese businesses if the country doesn’t ramp up domestic capacity now. The company has agreed to a joint venture with the southern municipality in which it will develop and operate a chipmaking plant that can produce silicon of 28 nanometers or above, it said in a stock exchange filing. China wants to build a coterie of technology giants that can stand shoulder-to-shoulder with Intel and TSMC.

6. Australia Posts First Quarterly Decline in Population Since 1916

Australia recorded the first quarterly fall in its population since World War I as more people departed the island nation than arrived in the three months through September. International border closures resulted in the population falling by 0.02%. Net overseas migration dropped by 34,800 in the third quarter, with 55,400 people departing Australia and 20,600 arriving from overseas.

7. Europe Braces for Astra Vaccine Decision After Fiasco

The European Union is bracing for a decision by its health regulator on whether AstraZeneca Plc’s Covid-19 vaccine is safe to use, a key step in the bloc’s efforts to move past a messy suspension by several countries. The European Medicines Agency, which has consistently backed the shot even amid concerns about the risk of blood clotting, will issue updated guidance on Thursday. While a positive recommendation should give governments in France, Germany and elsewhere the confidence to resume using the vaccine, there’s already been some damage done.

8. China Facing Shortages in Feed: Seeks to Cut Corn and Soymeal

China, the world’s biggest importer of corn and soybeans, is seeking to reduce its use in livestock feed in an attempt to curb the country’s dependence on foreign supplies. The top global pork producer has been buying record amounts of both commodities as demand for animal feed, cooking oil and industrial products outstrips the nation’s ability to produce them. China is tackling the issue by boosting support for farmers, raising productivity and reducing wastage, but demand continues to expand driven by economic growth and affluence. The agriculture ministry has drafted a plan to partly replace the usage of corn and soybean meal with alternatives such as rice, wheat, potatoes and other oilseed meals.

9. Oil Is on Longest Run of Declines in Over a Year as Rally Frays

Oil extended declines as inflation concerns rattled broader sentiment and physical markets in Asia cooled. West Texas Intermediate retreated for a fifth straight day, putting the U.S. benchmark on course for the longest losing streak in more than a year. The dollar rose, U.S. equity futures dipped and bond yields climbed amid inflation fears. Brent’s market structure has also steadily weakened in recent days. Oil prices have backtracked this week despite the surprise OPEC+ decision earlier this month to extend output cuts. Concern has arisen that the demand recovery could stall after several European countries halted the use of AstraZeneca Plc’s coronavirus vaccine, the latest blow to a stuttering rollout in the region.

10. Plastic Prices Hit Record High to Stoke Inflation Concerns

For anyone looking or examples of inflation these days, raw materials are a good place to start. Copper, steel — even lumber — are either near or at record highs. And so too are plastics, which often are overlooked but are on a tear right now. Although they’re the building blocks of thousands of everyday products, plastics and their chemical ingredients don’t trade on major commodity exchanges, and large price moves are largely invisible to the wider world. Yet polyvinyl chloride, or PVC, is in the midst of a dramatic rally, driven by a combination of rebounding global consumer demand and production outages from last month’s Texas freeze.

Curated from Bloomberg.com

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Editorial

The Impact of Rising US Treasury Bond Yields: Explained

The United States Treasury Bond Yield has been showing a significant rise over the past week or so. On Thursday (March 4), the bond yield (or returns) rose to its highest level since 2015— 1.57%. The Dow Jones Industrial Average fell by more than 1% on the same day, while the S&P 500 nearly erased all of its gains made in 2021. As soon as the yield rates increase, we see markets crashing globally. You may recall that our Nifty fell by over 500 points last Friday (Feb 26) due to the same reason. Let us have a detailed understanding of this phenomenon.

A Breakdown of Events

Bonds are debt instruments that are issued by governments and corporations when they require funds. Bond yield is the fixed return that an investor gets on a bond or any particular government security. Amidst the Covid-19 pandemic, the US Federal Reserve had cut interest rates (on loans) to near-zero levels in March 2020. This meant that people could borrow more money from banks at cheaper rates. They could use this money for basic consumption and other requirements, and thus, kick the economy out of recession. 

Once the US Fed cut interest rates, bonds became more attractive as they gave fixed returns. There was more demand for bonds, which led to an increase in bond prices. The higher a bond’s price, the lower will be its yield. This is because an investor who is buying a bond will now have to pay more for the same returns. As we know, people had also turned away from the stock market as panic had led to a collective sell-off during March-April.

The Current Scenario

In recent months, the situation has more or less turned for the better. The rate of infections has fallen and people are receiving Covid-19 vaccines. The $1.9 trillion stimulus package in the United States will also provide a well-needed boost for all economic activities. Due to these positive sentiments, investors had moved away from treasury bonds to riskier assets such as stocks (as it provided higher returns). This ultimately led to a fall in treasury bond prices and an exponential rise in bond yields to their recent highs.

Since the beginning of 2021, bond yields have surged from 0.9% levels to 1.57%. Higher yields in the US signal that the Federal Reserve might start to increase the interest rates to contain inflation. When economic growth starts to take off in the US, inflation will surely rise. The rise in interest rates will discourage people from taking loans, and there will be less market liquidity. If this happens, investing in stock markets can become riskier. Due to this fear, global investors started to panic and pulled out money from emerging economies such as India— where the economy is recovering at a relatively slower pace.

1-Day Chart of US Government Bond 10-Year Yield and Nifty 50. Source: TradingView

Large institutions felt it was time to invest more money into low-risk securities and balance their portfolios. They started to sell off their stocks and infuse more money into US Treasury bonds, which are now providing them with high/safe returns. This is why we have been seeing a huge sell-off in our Indian stock markets when there is a spike in bond yields. 

Conclusion

The general mood in the Indian stock market was quite positive after the Union Budget 2021 presentation on February 1. We saw benchmark indices (Nifty and Sensex) hit record highs. However, the rising bond yields have now become a major concern for investors. We can also see bond yields rising in the United Kingdom and India as well. Markets have become highly volatile and unpredictable. The increase in bond yields has also impacted the currency market. The rupee closed at 73.47 against the US Dollar on March 1. This was the biggest single-day fall since March 2020. Gold prices have fallen heavily due to the same reason.

In the US, the Federal Reserve has outrightly stated that the recent rise in bond yields would not affect their existing policies. The Fed said that interest rates would be kept near-zero levels until the economy reaches full employment. This is positive news for stock markets, as lower interest rates for borrowings leads to better liquidity. 

Many financial analysts have warned that markets could crash further if bond yields continue to rise. However, the recent GDP numbers show that India has made a strong economic recovery. All major sectors such as manufacturing, services, and real estate are showing rapid growth. These are very positive sentiments that would encourage investors to infuse more money into our stock markets (which is already in a bullish phase). Thus, the correction we are witnessing now will most probably be a short-term phenomenon. Do keep a close watch on both domestic and global developments while entering into trades.