|Bid||123.72 x 200|
|Ask||124.40 x 300|
|Day's Range||124.02 - 124.49|
|52 Week Range||116.49 - 133.56|
|PE Ratio (TTM)||N/A|
|Expense Ratio (net)||0.15%|
We've been hearing a lot of warnings from Fed officials about frothy markets and for good reason. Easy borrowing conditions and low rates have led us to record highs in stocks. While the Fed looks dead set on raising rates, it could be setting itself up for a tricky situation, one that has historically led to recession. Yahoo Finance's Justine Underhill has more at the charts.
The market for new investment-grade bonds could be about to take a dip. Bank of America Merrill Lynch credit strategists expect new high-grade corporate bond volume to slide 15% in 2018 to $1.13 trillion from a record estimated at $1.34 trillion this year. Less demand for bonds, for one, and for another, the fact companies moved up plans to sell bonds to get ahead of expected hikes in short-term rates by the Federal Reserve, say the strategists in Bank of America Merrill Lynch’s high-grade research group.
Positive economic data, higher chances for tax reform, and the possibility of a market-friendly Fed chair spelled trouble for the US bond markets last week.
The US Dollar Index regained strength last week by rising in three out of five trading days. This week, the US Dollar Index started on a stronger note.
In smart conversations with clients last week, the one question I was asked the most often was what it would take to derail this mother of all stock market rallies. While idiosyncratic risks can pop up at any given time without any notice, the more systemic risks revolve around a change in interest rate environment. The Federal Reserve as well as other important central banks are slowly but surely shifting from a period of accommodation to a period of tightening, i.e.
Inflation may be stubbornly out-of-sight, but investors have bought more protection against the prospect of rising prices this year. Tradeweb, an electronic bond-trading platform, has seen a 24 percent pickup in trading of inflation-protection securities globally after finding little interest in the prior two years, the firm said in a post earlier this week. Investors are buying more U.S. Treasury Inflation Protected Securities (TIPS) as well as European index-linked government bonds.
Treasuries sold off overnight in the wake of the US Senate’s passage of a budget that could lead to meaningful tax reform, putting yields back on a higher trajectory. The market anticipates stronger economic growth fueled by lower taxes will keep the Federal Reserve on track to hike interest rates in December and beyond. The yield on the benchmark US 10-year Treasury note rose nearly six basis points Friday morning to 2.379% after falling in four of the six previous days.
Treasury prices got a lift today from investors searching for safety amid global worries. Spain’s decision to take greater control of Catalonia in the wake of the region’s push for independence, and comments from China’s central bank governor Zhou Xiaochuan, spurred a flight to quality that was largely sustained this morning even as stronger economic news was released. The iShares Barclays 20+ Year Treasury Bond ETF (TLT) has risen 0.6% to $125.84.
The hurricanes that walloped Houston, Florida and Puerto Rico haven’t led to a burst of rebuilding — just yet, as government data released this morning shows. Housing starts slid 4.7% to a 1.127 million unit rate from a 1.183 million rate in August, the U.S Census Bureau and the U.S. Department of Housing and Urban Development reported this morning. Building permits fell 4.5% to 1.215 million unit rate instead an expected 3% drop to 1.238.
US bond markets (BND) saw some recovery last week. Overheated expectations for a December rate hike cooled off after the FOMC meeting minutes were reported.
In highlights from this week's trading diary and posts, Kass discusses going shorter on financials and discusses his takeaways and observations.
Investors have poured more than $100 billion into bonds this year. Fixed income experts believe a turnaround could be at hand.
BofA Merrill Lynch's Hans Mikkelsen and team have the details: Inflows to US bond funds and ETFs moderated to $3.44bn this past week (ending on October 11) from a high $7.25 inflow a week earlier. Inflows to stocks, on the other hand, accelerated from $0.27bn to $5.46bn - the highest weekly inflow since June.
Readings on inflation and retail sales were both expected to be strong on Friday and they both disappointed. Headline retail sales growth was up 1.6% month-over-month when 1.9% growth was expected. The Consumer Price Index (CPI) was up 0.5% in September, higher than the 0.4% growth of last month, but less than the 0.6% economists were expecting.
Bond traders have few reasons to be happy this week. Chances for tax reforms continue to increase with the US Senate moving on a path that would mean only 51 votes could be required to pass the bill.
The US Dollar Index regained strength in September and rose for four consecutive trading weeks. However, the US Dollar Index opened lower this week.
On the positive side, the unemployment rate fell to 4.2% from 4.4% and wages jumped 0.5% month-over month in September. Economists expected unemployment to stay at 4.4% and wages to grow 0.3%. "Some of the September wage gains may have been from businesses paying-up for workers to assist with clean-up and reconstruction," notes Thomas Byrne of Wealth Strategies & Management.