Bonds signals trouble ahead


Today 10 year yield touched 1.59 %( almost 45 basis point move in a 2 weeks)  and major global index declined as a result. Recession talks grew louder and gold touched $1500 per ounce after years. Also most of the central banks - india. New Zealand  and Thailand moved aggressively and cut more than expected. Signaling trouble ahead.

Then there was a week 10 treasury aution which helped the stocks and yields to get back and reversing days some 2 % losses.

I believe this is mainly due to the US  trade issues with China, mostly because there is no resolution in sight or near future. So this is more psychological than fundamental. Because of the tax credit in 2018, there is enormous amount of debt being autioned by treasury and for the past couple of times, it's a weak auction. Its pushing the yield up as a result.

But at the same time, investors are pushing down the yield because they are spooked with trade and global growth troubles.

In my opinion,  when the trade issues is resolved,  yields will go higher.

Note - Written on 8/7/2019

Comments