Continue reading Drop in Treasury Bond Yields Forecasts a Bear Market for Stocks

Drop in Treasury Bond Yields Forecasts a Bear Market for Stocks originally appeared on BloggingStocks on Wed, 11 Aug 2010 09:30:00 EST. Please see our terms for use of feeds.

Continue reading Falling Bond Yields Highlight Investor Fears

Falling Bond Yields Highlight Investor Fears originally appeared on BloggingStocks on Thu, 24 Jun 2010 16:00:00 EST. Please see our terms for use of feeds.

Last year saw one of the biggest stock rallies in history. Last year also saw bond yields fall by 3.72% on average. Investors who ran to the bond market for safety in 2008 and early 2009 saw their investments drop, while the risk takers who bought stocks are sitting pretty.

All of this was happening while the Federal Reserve sold $2.11 trillion of notes and bonds. The market was supported by the Fed's purchase of $300 billion of the $2.11 trillion in notes, bonds and inflated-related securities. Foreign demand was strong. Indirect bidders, who include foreign buyers, bought 45% of $1.1917 trillion in U.S. notes and bonds, up 29% from last year.

Continue reading Divergence Between Stock and Bond Returns Puts Pressure on the Bond Market

Divergence Between Stock and Bond Returns Puts Pressure on the Bond Market originally appeared on BloggingStocks on Mon, 04 Jan 2010 11:15:00 EST. Please see our terms for use of feeds.

First of all what is sovereign debt? Sovereign debt is created by the issuance of bonds by a country's government. When the financial meltdown occurred last year, governments around the world issued bonds to obtain money for their respective stimulus programs. The amount of debt (bonds) issued worldwide has been astronomical.

Now, investors around the world are worried that some countries are in danger of their bond markets collapsing or, worse case scenario, for the country to default on its bonds.

Continue reading New Investor Alert on Sovereign Debt

New Investor Alert on Sovereign Debt originally appeared on BloggingStocks on Sat, 02 Jan 2010 16:10:00 EST. Please see our terms for use of feeds.

Continue reading Closing Bell: When rising bond yields hurt stocks (BAC, BSX, GM, PG, SNDK)

Closing Bell: When rising bond yields hurt stocks (BAC, BSX, GM, PG, SNDK) originally appeared on BloggingStocks on Wed, 27 May 2009 16:00:00 EST. Please see our terms for use of feeds.

This strategy went from being a modestly successful trade through October to a hero-sized trade in the past 45 days.

The Fed funds rate, the most widely followed interest rate the banks charge each other for overnight lending, topped out in August 2006, at 5.25%.

When the Fed started easing rates thereafter, no one at the economic think tanks forecasted anything close to what we are seeing today (namely a Fed funds rate of zero to 0.25% -- a decline of a full 5% in 17 months).

The decline in rates started out so orderly and coordinated that it seemed almost too good to be true, and the Dow Jones Industrial Average hit an all-time high, topping 14,000 for the first time in July 2007.

However, the quarter-point cuts gave way to a three-quarter-point cut, or 75 basis points, on Jan. 22, 2008, signaling that the Fed was seeing a material breakdown in the credit and housing markets. Following that seemingly radical rate cut, just eight days later on Jan. 30, the Fed again slashed the Fed funds rate by another half point, or 50 basis points, to 3%.

From there Bernanke & Co. held steady for a couple months to see if any good would come of their efforts.

When evidence of further erosion in the credit markets surfaced with the impending collapse of Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), Indy Mac, Bear Streans and Lehman Brothers (OTC: LEHMQ), the Fed lopped another three-quarters of a point off the Fed funds rate, taking it down to 2.25% on March 18.

That was considered the absolute floor at the time, a level that would stick. But that wasn't the case.

Continue reading Best Trades of 2008: #2 Getting long and staying long the 30-year Treasury bond

Best Trades of 2008: #2 Getting long and staying long the 30-year Treasury bond originally appeared on BloggingStocks on Wed, 31 Dec 2008 12:00:00 EST. Please see our terms for use of feeds.

The real target for inflation is 2.5% originally appeared on BloggingStocks on Fri, 15 Jun 2007 11:00:00 EST. Please see our terms for use of feeds.

Lately, commentators have noted that U.S. long-term interest rates are on the rise. As of today, the yield on the 10-year Treasury note is hovering just below its late-January closing peak of 4.89%.

Yet this is not a purely domestic phenomenon. The same also holds true for bond markets around the world.

In each of seven selected international markets -- Europe, Switzerland, United Kingdom, Japan, Canada, Australia, and Hong Kong -- 10-year interest rates are at or near 2007 peaks. In four of them -- Europe, Switzerland, United Kingdom, and Australia -- long-term yields are not far off 12-month highs.

Amid signs that many central banks outside the U.S. are also poised to boost short-term rates in their own countries, some might say that the monetary environment is becoming less supportive for share prices.

So much for excess global liquidity?

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World.

A world of rising long-term rates originally appeared on BloggingStocks on Wed, 30 May 2007 17:00:00 EST. Please see our terms for use of feeds.