117.15 +0.41 (0.35%)
Pre-Market: 5:41AM EST
|Bid||117.04 x 2200|
|Ask||117.15 x 200|
|Day's Range||116.51 - 118.29|
|52 Week Range||116.49 - 129.57|
|PE Ratio (TTM)||N/A|
|Expense Ratio (net)||0.15%|
Is Volatility Set to Drop Further after Stock Market Rebound? US bond markets found some relief in the week ending February 16, as bond yields retreated from their multiyear high at the end of the week. The issue that was squeezing bond investors hasn’t gone away. The inherent risk of rising yields still exists, and last week’s respite could prove to be temporary at least for bond markets.
Markets were gripped with anxiety before the January inflation report was published on February 14. The inflation report was the focus for investors who have grappled with two weeks of panic selling. The anxiety was due to fear about the possibility of a faster rate hike pace from the Fed, which could increase funding costs for companies and increase bond yields (TLT) across the board.
Bad news is supposed to be good news for the bond market, but this week's news apparently hasn't been bad enough to set off a stampede at today's auction of 10-year Treasury notes. The relatively tepid demand--which coincides with news of a proposed Washington deal that would push up spending caps by an additional $300 billion over two years is pushing up bond yields. The notes were awarded at 2.811%, a bit higher yield (lower price) than the 2.80% when-issued trading at the 1 PM EST auction time, notes Peter Boockvar, chief market strategist at Bleakley Advisory Group.
What Triggered the Stock Market Panic This Month? Since the onset of the current euphoric rise in stock prices after the US elections, the bond markets have remained somewhat muted. Until recently, the ten-year bond yields have been hovering near the 2.5% mark, around 20 basis points higher than the 2016 average of 2.3%.
The recent rout in the equity market was fueled by concerns over rising interest rates, which could increase costs for the industry. Investor anxiety about rising rates was triggered by comments from San Francisco Fed president John Williams on Friday, February 2. During his speech, Williams said he envisioned three or four hikes this year, and investor anxiety escalated further after the non-farm payrolls report indicated impressive job gains in January.
During the U.S. stock market's worst sell-off in years, bitcoin is not acting as an uncorrelated store of value.
The US bond market’s (BND) troubles escalated last week as inflation expectations continued to rise. The first reason was the January FOMC (Federal Open Market Committee) meeting. The Fed left interest rates unchanged at that meeting but changed its outlook on inflation, saying that inflation (TIP) could pick up and stay near the 2% target.
Friday started with good news—a better than expected jobs report—that was bad news for the bond market. Bond prices, which move inversely to their yields, fell fast in the morning, while the yield on the 10-year Treasury Note hit a four-year high of 2.84%. Yields have been heading higher for weeks, but the jobs report appears to have accelerated the anxiety in the market.
The FOMC, through its implementation note released with the January statement, announced its decision to allow the open market desk at the Federal Reserve Bank of New York to increase the amount of Treasury (GOVT) securities that are being allowed to expire without rolling over every month. The exercise of trimming the Fed’s balance sheet was taken up to offload the huge amount of Treasury securities that the Fed amassed over the last decade through its QE (quantitative easing) programs 1, 2, and 3.
What Boosted the Leading Economic Index in 2017? The Conference Board LEI (Leading Economic Index) is expected to use only forward-looking indicators in its economic model, but there’s one exception to this condition. The consumer expectation for business conditions is derived using expectations, rather than any economic indicator.
What Boosted the Leading Economic Index in 2017? In its December meeting, the US Federal Reserve increased the federal funds rate by 0.25%, just as markets expected. This led to the narrowing of credit spreads between long-term and short-term yields, resulting in a flattening yield curve.
When the market falls and volatility rises, investors may want to hide in bonds and gold, according to CNBC analysis.
The reopening of the US government on Tuesday, hawkish comments from the central banks of Europe and Japan, and President Trump’s “America is open for business” speech at the World Economic Conference in Davos, Switzerland, had little impact on the bond market. According to the latest COT (Commitment of Traders) report released on January 26 by the CFTC (Chicago Futures Trading Commission), speculators increased their short positions on the ten-year bond with net short positions increasing from 89,259 contracts to 117,877 contracts. The core PCE (personal consumption expenditures) inflation data could be import since the Fed prefers this measure of inflation when making interest rate decisions.
Legendary value investor Bill Miller has an optimistic view on the equity market. In the above part, we saw that he believes the bond bull market will end soon and the investor rush out from the bond market (BND) could boost the equity market (SPY).
Legendary value investor Bill Miller shared his views on the bond market (BND), equity market (SPY) (SPX-INDEX), and bitcoin in a letter on January 23, 2018. Bill Miller is the chair of Miller Value Partners, which he founded in 2016. Before that, he was the chair and chief investment officer at Legg Mason Capital Management for 35 years.