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American Capital Agency Corp. Message Board

  • dr_klumps dr_klumps Jul 31, 2013 3:44 PM Flag

    6% Treasury Yield - COMING FAST

    Goldman Sachs just upped the target too.

    The Federal Reserve will lose control of interest rates as the "great rotation" out of bonds into equities takes off in full force, according to one market watcher, who sees U.S. 10-year Treasury yields hitting 5-6 percent in the next 18-24 months.

    "It is our opinion that interest rates have begun their assent, that the Fed will eventually lose control of interest rates. The yield curve will first steepen and then will shift, moving rates significantly higher," said Mike Crofton, President and CEO, Philadelphia Trust Company told CNBC on Wednesday.

    "If the great rotation that everybody talks about out of bonds into stocks does happen, and that gains its own momentum, you will see rates begin to back up very quickly; the Fed will not be able to control it," added Crofton, who argues that for now, "the great rotation" has been more out of bonds into cash, rather than stocks.

    (Read more: Goldman Sachs:Treasury yields will hit 4% )

    Under this scenario, he sees the yield on the 10-year rising to 3.5-4 percent in a "very short period of time." Thereafter, he expects yields to move to 5-6 percent over the next 18-24 months. Yields were last seen at 6 percent level over a decade ago, in mid-2000.

    Crofton says that as the average investor begins to see that they are losing money on their bond portfolios, this will drive fear into the market that will feed on itself. "More and more bonds will be sold and rates will continue to go up."

    U.S. government bond yields have risen at a faster-than-expected pace in the recent months on expectations that the Fed will begin scaling back its monthly bond buying program later this year.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • NOT IN YOUR LIFETIME!!! The economy is growing less than 2%. Ain't no way rates hit 6%.

      Sentiment: Strong Buy

    • Goldman Sachs just upped the target too.

      The Federal Reserve will lose control of interest rates as the "great rotation" out of bonds into equities takes off in full force, according to one market watcher, who sees U.S. 10-year Treasury yields hitting 5-6 percent in the next 18-24 months.

      "It is our opinion that interest rates have begun their assent, that the Fed will eventually lose control of interest rates. The yield curve will first steepen and then will shift, moving rates significantly higher," said Mike Crofton, President and CEO, Philadelphia Trust Company told CNBC on Wednesday.

      "If the great rotation that everybody talks about out of bonds into stocks does happen, and that gains its own momentum, you will see rates begin to back up very quickly; the Fed will not be able to control it," added Crofton, who argues that for now, "the great rotation" has been more out of bonds into cash, rather than stocks.

      (Read more: Goldman Sachs:Treasury yields will hit 4% )

      Under this scenario, he sees the yield on the 10-year rising to 3.5-4 percent in a "very short period of time." Thereafter, he expects yields to move to 5-6 percent over the next 18-24 months. Yields were last seen at 6 percent level over a decade ago, in mid-2000.

      Crofton says that as the average investor begins to see that they are losing money on their bond portfolios, this will drive fear into the market that will feed on itself. "More and more bonds will be sold and rates will continue to go up."

      U.S. government bond yields have risen at a faster-than-expected pace in the recent months on expectations that the Fed will begin scaling back its monthly bond buying program later this year.

      Sentiment: Strong Sell

    • It kind of makes sense that if bond owners start to sell their bonds that issuers of bonds will have to offer higher interest rates to get people to buy them unless the Fed buys them instead. So basically if the Fed doesn't buy them then interest rates will definitely go up. So it's up to the Fed.

      There are a lot of mindless bond investors that are clueless of the relationship between the value of the bond and bond rates who will hold indefinitely. But I have to assume that anyone who does understand this relationship is looking for the exit. If not then my impression of the intelligence of most large investors will go down significantly. And I don't think that will happen. I think they will do exactly what is expected of them which is to sell.

      I'm not sure how balanced funds handle a situation like this since they are expected to have a certain amount of bonds. I guess they sell them when people decide to get out of balanced funds. But then a lot of clueless people who don't understand bonds will remain in them.

      • 2 Replies to raybans2
      • This is way overdone. Bond rates on the 10 year are still below 3 and growth is below 2 so 6% bond yields are a longshot at best.

      • "I'm not sure how balanced funds handle a situation like this since they are expected to have a certain amount of bonds."
        A balanced fund will likely attempt to manage their bond portfolio similar to how an aggregate bond fund would. They will manage the duration and convexity over the range of the yield curve. In an upward rising curve obviously shortening duration an increasing positive convexity. Addtionally, probally adding floating rate and some convertibles.

    • That will be nice. I can finally make some money on my cash which is usually about half of my holdings lately.

      • 1 Reply to raybans2
      • Can the US economy handle a 6% Treasury rate ? Many doubt it. I have read more like a 4.5% Treasury rate in two years. One analyst estimated a 4.5% Treasury yield would lead to most equities losing 30% to 50% of there current value. After watching my Preferred fall in value ,I sold all and the prices continue to drop. If I could get a 4.5% Treasury yield I would be content to park 50% there long term.

    • Goldman Sachs just upped the target too.

      The Federal Reserve will lose control of interest rates as the "great rotation" out of bonds into equities takes off in full force, according to one market watcher, who sees U.S. 10-year Treasury yields hitting 5-6 percent in the next 18-24 months.

      "It is our opinion that interest rates have begun their assent, that the Fed will eventually lose control of interest rates. The yield curve will first steepen and then will shift, moving rates significantly higher," said Mike Crofton, President and CEO, Philadelphia Trust Company told CNBC on Wednesday.

      "If the great rotation that everybody talks about out of bonds into stocks does happen, and that gains its own momentum, you will see rates begin to back up very quickly; the Fed will not be able to control it," added Crofton, who argues that for now, "the great rotation" has been more out of bonds into cash, rather than stocks.

      (Read more: Goldman Sachs:Treasury yields will hit 4% )

      Under this scenario, he sees the yield on the 10-year rising to 3.5-4 percent in a "very short period of time." Thereafter, he expects yields to move to 5-6 percent over the next 18-24 months. Yields were last seen at 6 percent level over a decade ago, in mid-2000.

      Crofton says that as the average investor begins to see that they are losing money on their bond portfolios, this will drive fear into the market that will feed on itself. "More and more bonds will be sold and rates will continue to go up."

      U.S. government bond yields have risen at a faster-than-expected pace in the recent months on expectations that the Fed will begin scaling back its monthly bond buying program later this year.

      Sentiment: Strong Sell

      • 1 Reply to gggoode33
      • Goldman Sachs just upped the target too.

        The Federal Reserve will lose control of interest rates as the "great rotation" out of bonds into equities takes off in full force, according to one market watcher, who sees U.S. 10-year Treasury yields hitting 5-6 percent in the next 18-24 months.

        "It is our opinion that interest rates have begun their assent, that the Fed will eventually lose control of interest rates. The yield curve will first steepen and then will shift, moving rates significantly higher," said Mike Crofton, President and CEO, Philadelphia Trust Company told CNBC on Wednesday.

        "If the great rotation that everybody talks about out of bonds into stocks does happen, and that gains its own momentum, you will see rates begin to back up very quickly; the Fed will not be able to control it," added Crofton, who argues that for now, "the great rotation" has been more out of bonds into cash, rather than stocks.

        (Read more: Goldman Sachs:Treasury yields will hit 4% )

        Under this scenario, he sees the yield on the 10-year rising to 3.5-4 percent in a "very short period of time." Thereafter, he expects yields to move to 5-6 percent over the next 18-24 months. Yields were last seen at 6 percent level over a decade ago, in mid-2000.

        Crofton says that as the average investor begins to see that they are losing money on their bond portfolios, this will drive fear into the market that will feed on itself. "More and more bonds will be sold and rates will continue to go up."

        U.S. government bond yields have risen at a faster-than-expected pace in the recent months on expectations that the Fed will begin scaling back its monthly bond buying program later this year.

        Sentiment: Strong Sell

 
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