Pulling Away the Football

By |2017-10-05T10:59:52+00:00October 4th, 2017|Categories: Global Market Update|Tags: , , , |

Poor Charlie Brown. That’s what I thought when I read that hedge funds have gotten massively short the 30-year US Treasury bond. When traders “short” a security, they expect the price to go down. When they short bonds, they think interest rates will rise. At her September press conference, Janet Yellen signaled that the Fed will continue to raise rates, despite stubbornly low inflation. Higher rates equals lower bond prices. So what’s the problem? The problem is [...]

Desperately Seeking Safety

By |2017-08-18T09:18:45+00:00August 17th, 2017|Categories: Global Market Update|Tags: , , |

Is anything safe? Photo: Josh Rogan. Source: Morguefile For many, safety means credit risk, full stop. Johnson & Johnson bonds are less risky than Ford bonds—the company has less leverage, stronger cashflow, and more steady revenue growth. But safety is more than just having a AAA rating. A few years ago US was downgraded from AAA to AA by S&P and interest rates still fell rather than rising. Clearly, the market was looking at something other than [...]

No Safety in Numbers

By |2016-11-17T15:39:35+00:00October 28th, 2016|Categories: Global Market Update|Tags: , , , |

When are sovereign bonds no longer safe? Global Yield Curves, 10-28-16. Source: Bloomberg For decades people have invested in stocks for growth and in bonds for safety. But the global financial crisis and its economic aftermath have changed that. Now sovereign bonds around the world have extremely low yields. 30-year bonds in the US yield just over 2.5%, and that’s the highest yield anywhere. You can get higher yields in emerging markets, but those come with currency, [...]

Chart Of The Week: Bonds Versus Oil

By |2016-12-01T15:45:05+00:00January 21st, 2015|Categories: Technical Perspective|Tags: , , , , |

Summary Important bottoms in crude oil have often matched important bottoms in Treasury yields. The bond market seems intrinsically stretched in context of its multi-decade progression. Long-term bonds are especially risky during the late stages of oil-market crashes. While many factors influence the bond market, it's worth noting that cyclical bottoms in oil prices (NYSEARCA:USO) have often matched cyclical bottoms in long-term Treasury (NYSEARCA:TLT) yields. The oil crashes ending in March 1986, December 1998 and December 2008 [...]

Bonds-A-Go-Go

By |2016-11-17T16:37:14+00:00September 29th, 2014|Categories: Global Market Update|Tags: , , , |

Will loyal investors swamp Bill Gross’s new venture?On Friday Bill Gross rocked the investing world by leaving PIMCO, the two-trillion dollar asset management firm he founded, and going to work for a competitor. Gross is one of the best-known investors in the world. With his folksy charm and colorful commentary, Gross made investing in bonds cool, which is pretty tough. Bonds are inherently boring, or should be. If everything goes right, you get your money back; if [...]

Interest Rate Risk and the Bond Market

By |2015-01-09T12:43:07+00:00January 5th, 2012|Categories: Money Basics|Tags: , , |

The distrust of the stock market this past year has encouraged investment flow into the bond market. The bond market typically provides a more conservative investment than equities as well as a regular fixed income payment to the lender. When you (the lender) purchase a bond, you are loaning money to the government or a corporation over a specific period of time while collecting steady income from the bond issuer. […]