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    Hey,

    I'm trying to get my head around why the yields have increased this week...

    Given that Obama has announced this tax deal with the Republicans (although the democrats have now rejected this...) which is obviously to try to promote consumer spending etc. and therefore economic growth.

    From this growth, we would expect equity markets to be more attractive than bonds, and so the prices of bonds are forced down (and therefore yields up) to counteract this.


    Am I right in my evaluation of this?

    Thanks
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    There are several possible causes. One of these is improved investor expectations about other assets. But it could also be the result of concerns about the increase in the deficit caused by the tax cuts.
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    (Original post by chrisg)
    Hey,

    I'm trying to get my head around why the yields have increased this week...

    Given that Obama has announced this tax deal with the Republicans (although the democrats have now rejected this...) which is obviously to try to promote consumer spending etc. and therefore economic growth.

    From this growth, we would expect equity markets to be more attractive than bonds, and so the prices of bonds are forced down (and therefore yields up) to counteract this.


    Am I right in my evaluation of this?

    Thanks
    Yield action of 10yr the last month ( +80bps or so ).

    -Think about positioning, mrkt was very long UST going into QE Nov 4, therefore not at all surprising yield action. Positioning clearly shown by performance of 10yrs, vs poor CPI print and Non Farm. Similar price action to Nov01, post fed 150bps easing. For the first time in a while UST's closed in +ve real terms.
    -10yrs have also broken several key technical lvls this week (200ma/ time period highs).
    - Overall expectations of lower QE ,due to slightly better data, have resulted in more bullish predictions of US growth. Several Fed members confirming that they do actually care about inflation have weighed. Also check out what Bernancke said on Sunday night.

    -Rates are driving the macro markets at the moment, x-ccy basis/ ST rates are proving to be v.interesting.
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      (Original post by jakezg)
      -10yrs have also broken several key technical lvls this week (200ma/ time period highs).
      What?
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      (Original post by jakezg)
      Yield action of 10yr the last month ( +80bps or so ).

      -Think about positioning, mrkt was very long UST going into QE Nov 4, therefore not at all surprising yield action. Positioning clearly shown by performance of 10yrs, vs poor CPI print and Non Farm. Similar price action to Nov01, post fed 150bps easing. For the first time in a while UST's closed in +ve real terms.
      -10yrs have also broken several key technical lvls this week (200ma/ time period highs).
      - Overall expectations of lower QE ,due to slightly better data, have resulted in more bullish predictions of US growth. Several Fed members confirming that they do actually care about inflation have weighed. Also check out what Bernancke said on Sunday night.

      -Rates are driving the macro markets at the moment, x-ccy basis/ ST rates are proving to be v.interesting.
      Technicals? They were made for Tech Research to feel like they are important.

      The sell off of the past few days has been on the back of Obama's extension of the Bush tax-cuts. The markets split between those that think these QE2 and fiscal stimuli will work, and those that are concerned on US prolificacy. Anyone that REALLY believed the B/E was at 7yrs was wrong from the get go. (B/E is currently at 4y)
      The belly is risking losing its fundamental link to actual inflationary expectations. The 7-10y bucket has become a political football.

      Good to see that one of GS top trades for 2010 was a 10s30s steepener. Shame it flattened by 50bp. Though, you werent alone, MS called for it as well.
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      Investors taking back benches. Remember Japan, Germany and UK all saw yield increases so don't attribute it all the specific things in the US. I think there was also uncertainty over asset purchasing at the FED.
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      (Original post by JakeF)
      Technicals? They were made for Tech Research to feel like they are important.

      The sell off of the past few days has been on the back of Obama's extension of the Bush tax-cuts. The markets split between those that think these QE2 and fiscal stimuli will work, and those that are concerned on US prolificacy. Anyone that REALLY believed the B/E was at 7yrs was wrong from the get go. (B/E is currently at 4y)
      The belly is risking losing its fundamental link to actual inflationary expectations. The 7-10y bucket has become a political football.

      Good to see that one of GS top trades for 2010 was a 10s30s steepener. Shame it flattened by 50bp. Though, you werent alone, MS called for it as well.

      Obama- one of the catalysts, not the whole story.
      QE2 is 600bn, some think QE3 of another $400bn-1.4tn. A few weeks ago a lot of consensus for QE3, less likely now.
      Technicals- your be very suprised to see how many ppl care where the resistance/supports are. Sad but true, another part of the bucket. A lot of CTA's in mrkt, make them care.

      The last trade similar trade to that 10s30s i heard was a 7s30s flattener . Whats BC's top trades for 2011? Long american banks vs UK banks?
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      (Original post by jakezg)
      Obama- one of the catalysts, not the whole story.
      QE2 is 600bn, some think QE3 of another $400bn-1.4tn. A few weeks ago a lot of consensus for QE3, less likely now.
      Technicals- your be very suprised to see how many ppl care where the resistance/supports are. Sad but true, another part of the bucket. A lot of CTA's in mrkt, make them care.

      The last trade similar trade to that 10s30s i heard was a 7s30s flattener . Whats BC's top trades for 2011? Long american banks vs UK banks?
      Haha, thatd be telling. Id be inclined to receive any 5y5y in EM Asia, especially SGD, TWD both at nice levels.
      a 7s30s flattener NOW would be a pretty decent position. I reckon youre probably referring to a BC recommendation of before QE2?

      this is a pretty decent article for anyone interested.

      http://seekingalpha.com/article/2407...the_macro_view

      (and if anyone can think of a better article title than that..)
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        (Original post by jakezg)
        Obama- one of the catalysts, not the whole story.
        QE2 is 600bn, some think QE3 of another $400bn-1.4tn. A few weeks ago a lot of consensus for QE3, less likely now.
        Technicals- your be very suprised to see how many ppl care where the resistance/supports are. Sad but true, another part of the bucket. A lot of CTA's in mrkt, make them care.

        The last trade similar trade to that 10s30s i heard was a 7s30s flattener . Whats BC's top trades for 2011? Long american banks vs UK banks?
        I've made CTA type algos - technical analysis doesn't come into it. Ever. If you turn the chart upside down and don't immediately have to do the opposite trade, you've got a real problem with it.
       
       
       
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