Latest news with #U.S.Treasuries
Yahoo
a day ago
- Business
- Yahoo
Following significant rate hikes, bonds are back in the game
Guess who just got back today Them wild-eyed boys that had been away Haven't changed, had much to say But man, I still think them cats are crazy The boys are back in town —Thin Lizzy Government bonds: The gift that (usually) keeps on giving Historically, bonds have provided investors with two main benefits. First, their yields have provided a reasonable, if unspectacular return. Second, they have offered diversification value, muting overall portfolio losses during bear markets. By owning high quality bonds, you got paid for protecting your portfolio during times of market turmoil, which is akin to receiving (rather than paying) a premium for fire insurance — a remarkably sweet deal indeed. However, these benefits have historically ranged from significant to nonexistent, depending on the investment environment. A bear market sedative As the accompanying table illustrates, in five of the six equity bear markets before that of 2022, bonds provided investors with much needed gains, thereby mitigating the overall damage to their portfolios. During the tech wreck of the early 2000s, a balanced portfolio that was 60 per cent weighted in the S&P 500 and 40 per cent weighted in seven- to 10-year U.S. Treasuries declined 16.41 per cent, as compared with a fall of 42.46 per cent for the all-stock portfolio. In the global financial crisis (GFC) of 2007-2009, the balanced portfolio lost 23.92 per cent versus a loss of 45.76 per cent in equities. The ZIRP era and the erosion of bond powers During the GFC, central banks entered hyper-stimulus mode to stave off a collapse of the global financial system and avoid a worldwide depression. ZIRP (zero interest rate policy) stances became the norm for monetary authorities around the world, with rates remaining at historically low levels for the next 14 years. Although stimulative policies were successful in making the recession less severe than would have otherwise been the case, they also robbed bonds of their two key attributes. First, high quality bonds ceased to offer reasonable yields. Second, ultra low rates also limited the ability of bonds to provide capital gains during times of equity market turmoil, thereby hindering their diversification value. In 2016, Pacific Investment Management Co. co-founder and 'Bond King' Bill Gross commented that to repeat the bond market's 7.5 per cent annualized return over the past 40 years, yields would have to drop to negative 17 per cent. The math just didn't work. A clear warning sign As the saying goes, 'Hindsight is 20/20.' It is easy to understand what should have been done after an event has already happened, even if it was not obvious at the time. However, market behaviour during the COVID crash offered a clear warning that all was not well in bond land. The accompanying table compares countries by their pre-pandemic short-term rates and the returns of their 10-year government bonds during the subsequent bear market. There is a near perfect relationship across countries in terms of where their short-term rates stood prior to the pandemic and the subsequent return of their 10-year bonds. In the countries that initially had relatively high short-term rates, such as the U.S., Canada and Norway, 10-year bonds produced substantial gains and mitigated the damage caused by the vicious decline in stocks. In countries that started with rates that were neither relatively high nor low, such as the U.K. and Australia, 10-year bonds provided some, albeit lower, amounts of protection. Lastly, in countries that started with the lowest rates, such as Sweden, Japan, Germany and Switzerland, not only did government bonds fail to mitigate stock losses but their returns actually declined. Given the strong correlation between where pre-COVID rates stood in different countries and the subsequent ability of their bond markets to offset stock market losses, it was clear there was little, if any, gas left in the tank in the post-COVID world of zero rates, leaving investors largely unprotected. From hedge to Texas hedge Post-COVID, not only did ultra-low rates obliterate the insurance value of bond holdings, but the unprecedented amounts of monetary and fiscal stimulus that had been injected into the global economy left bonds particularly vulnerable to capital losses. Against this backdrop, when the rubber of stimulus hit the road of inflation in early 2022, central banks were forced to raise rates at a clip not seen since the Volcker era of the 1980s, resulting in painful declines in bond prices. Canadians snap up most U.S. bonds since 2023 TD Bank uses automation to trade more bonds In livestock trading, a Texas hedge refers to a scenario where cattle ranchers buy cattle futures contracts despite already owning cattle, thereby doubling their risk exposure. In 2022, when fears of a Fed-induced recession caused stock prices to tank, bonds not only failed to provide diversification but acted as a Texas hedge, declining alongside stocks. From early August 2020 through late October 2022, the Bloomberg U.S. Aggregate Bond index suffered a peak-trough loss of 18.5 per cent. Bonds are back in the game Following the most significant rate hiking cycle in decades, bonds are once again 'back in the game.' They offer reasonable yields, thereby restoring their prospects for delivering moderate returns, decreasing their risk and enhancing their diversification value. Given these resurgent qualities, bonds once again constitute a valuable component of many investors' portfolios. Noah Solomon is chief investment officer at Outcome Metric Asset Management LP. _____________________________________________________________ If you like this story, sign up for the FP Investor Newsletter.
Business Recorder
3 days ago
- Business
- Business Recorder
South African rand slightly weaker, local politics could provide support
JOHANNESBURG: The South African rand was slightly weaker on Tuesday, but analysts said local political developments could lend it support in the coming days. At 0745 GMT, the rand traded at 17.64 against the dollar, down 0.1% on Monday's closing level. The dollar was up 0.1% against a basket of global currencies. On Monday, President Cyril Ramaphosa removed a minister accused of misconduct by his party's key coalition partner, which could defuse tensions between the two main governing parties before a budget vote on Wednesday. The budget has been held up by months of political wrangling, but Wednesday's vote on the Appropriation Bill is the final hurdle for it to pass. Morgan Stanley said it had turned more bullish on South African government debt in the wake of the minister's removal. It said it now viewed South Africa's spreads - the premium investors demand to buy South African bonds rather than benchmark debt like U.S. Treasuries - as attractive compared with countries with similar credit ratings. South Africa's benchmark 2035 government bond was stronger on Tuesday, as the yield fell 9 basis points to 9.895%. Markets reacted little to a decline in a central bank business cycle indicator that gauges the economic outlook. The leading indicator fell 1.3% month-on-month in May, following a 0.6% decrease in April.
Business Insider
3 days ago
- Business
- Business Insider
Investors Buy European Bonds at Fastest Pace in a Decade amid Shift Away from U.S. Treasuries
Investors around the world are buying a growing number of European bonds as they move away from U.S. Treasuries, says Citigroup (C). Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. According to an analysis by Citigroup, which is based on European Central Bank (ECB) data, European bonds saw nearly 100 billion Euros (US$116.4 billion) of buying from outside the continent in May, the largest amount in more than a decade. Analysts at Citigroup, which is one of the largest U.S. commercial banks, say the data shows that European assets are benefiting from a move away from U.S. Treasuries and markets. The 100 billion Euros of net inflows into European bonds with maturities longer than one year that was seen in May were the largest on a monthly basis since 2014, says Citigroup. Loss of Confidence Allocation away from U.S. to European assets has been a big theme across financial markets in recent months as investor confidence in America is shaken by trade policies and rising debt. 'This could potentially be due to substitution out of dollar assets,' Citigroup wrote in a note to clients. President Donald Trump's confrontations with longstanding allies over trade and security, along with attacks on the U.S. Federal Reserve, have raised concerns about the safety and reliability of U.S. Treasuries. In contrast, European bonds have traded more steadily, boosting their appeal to investors as an asset that is perceived to be safe and secure. U.S. 30-year yields are up 40 basis points since April 2 when Trump announced his tariffs on foreign nations around the world, while German equivalents are up fewer than 20 basis points. Citigroup said it will scrutinize the June data on European bond buying that is scheduled to be released Aug. 18, which should help it to draw firmer conclusions about global investment flows. Is the Vanguard Total Bond Market ETF a Buy? (BND). So instead, we'll look at its three-month performance. As one can see in the chart below, the BND ETF has risen 0.65% in the past 12 weeks.
Business Recorder
3 days ago
- Business
- Business Recorder
Indian bond yields expected to show a slight decline
MUMBAI: Indian government bond yields are expected to move with a dipping bias in early deals on Tuesday, as chatter about one more rate cut from the central bank continue to support. The yield on the benchmark 10-year bond is likely to trade between 6.29% and 6.32%, a trader at a private bank said, after closing at 6.2996% on Monday. The 15-year 6.68% 2040 bond ended at 6.6105%. 'Though there is some move in U.S. Treasuries, local market will be completely unaffected by it, and like yesterday, we could see more movement in other longer duration papers rather than the benchmark and 2034 paper,' the trader said. U.S. yields fell, with the 10-year yield moving below 4.35% amid worries over impact of tariffs. Back home, a plunge in India's retail inflation rate to 2.10% in June, the slowest pace in more than six years, has led to increased talk of an interest rate cut next month. An estimated drop in inflation to a record low in July is further pushing up rate cut calls. The central bank slashed its key interest rate by 50 basis points last month, while changing its stance to 'neutral' from 'accommodative', which had fuelled speculation that the rate-cut cycle may already be over. The next monetary policy decision from the central bank is due on August 6, with some not ruling out a rate action. Downward revision in inflation opens up room for further easing when growth is showing a somewhat downside bias. August would be an appropriate time for a 25-bps cut, given the muted inflation scenario, analysts at ICICI Bank said in a note.
See - Sada Elbalad
5 days ago
- Business
- See - Sada Elbalad
Silver Continues Rally Amid Global Tensions and Rate Cut Expectations
Waleed Farouk Silver prices witnessed notable fluctuations in the local market over the past week, influenced by volatile movements on global exchanges. The metal touched its highest level in over 14 years before retreating due to profit-taking by some investors. Local Market Performance In the local market, the price of 800-purity silver ranged between EGP 52 and EGP 53 per gram before settling back at EGP 52 by the end of the week. The 999-purity silver was priced at EGP 65 per gram, while 925-purity silver stood at EGP 60. The price of a silver pound coin (925) is recorded at around EGP 480. Global Market Movements Globally, silver opened the week at $38.32 per ounce, rose to a peak of $39.13 — the highest since 2011 — then declined to $37.65, and finally closed the week at $38.11, marking a slight weekly drop of $0.11. Strong Performance Year-to-Date Since the beginning of 2025, silver prices have surged 27% in the local market, with the 800-purity silver rising by EGP 11 after starting the year at EGP 41. On the global front, the metal has jumped 32%, climbing from $29 to $38.11 per ounce, outperforming most other precious metals over the same period. Despite the recent slight pullback, the overall trend remains bullish. Silver is currently trading above short-term price averages, indicating continued buying momentum in the market. External Drivers Supporting Silver's Rally Several external factors have contributed to silver's upward trajectory this week, including: Falling U.S. Bond Yields The yield on 10-year U.S. Treasuries fell to 4.42%, while 2-year yields dropped to 3.87%, reducing the opportunity cost of holding non-yielding assets like precious metals, and boosting silver's appeal among institutional investors. Rising Expectations of Rate Cuts Federal Reserve Governor Christopher Waller called for early action on interest rate cuts, possibly as soon as July, citing signs of weakness in the private labor market. Markets are now pricing in a 45-basis-point cut by year-end, with the first move expected in September. Dollar Weakness The U.S. Dollar Index closed at 98.462, down 0.16% in the last session, despite weekly gains. The decline was driven by falling bond yields, mixed inflation data, and growing political pressure on Fed Chair Jerome Powell. Escalating Global Trade Tensions President Donald Trump reignited trade fears by threatening to impose tariffs of 15% to 20% on European goods. Additionally, trade negotiations with both Japan and Indonesia remain stalled, adding to global economic uncertainty. Can Silver Sustain Its Momentum? According to analysts at Citibank, silver's strong rally, especially since April, points to further upside potential. The bank forecasts prices reaching $40 within the next 6 to 12 months, and possibly hitting $46 by Q3 2025, supported by increasing industrial demand, tightening global supply, and ongoing geopolitical and monetary uncertainty. Some analysts also argue that silver remains undervalued based on the gold-to-silver ratio, which currently stands at around 87.3 compared to the historical average of 53. A return to this average, assuming gold prices remain steady, would suggest silver should trade above $63 per ounce — a 65% increase from current levels. Historically, silver's 1980 peak would equate to around $197 per ounce in today's dollars, while its 2011 surge saw prices near $71, implying that silver still has substantial room to rise from current levels near $38.40. read more CBE: Deposits in Local Currency Hit EGP 5.25 Trillion Morocco Plans to Spend $1 Billion to Mitigate Drought Effect Gov't Approves Final Version of State Ownership Policy Document Egypt's Economy Expected to Grow 5% by the end of 2022/23- Minister Qatar Agrees to Supply Germany with LNG for 15 Years Business Oil Prices Descend amid Anticipation of Additional US Strategic Petroleum Reserves Business Suez Canal Records $704 Million, Historically Highest Monthly Revenue Business Egypt's Stock Exchange Earns EGP 4.9 Billion on Tuesday Business Wheat delivery season commences on April 15 News Israeli-Linked Hadassah Clinic in Moscow Treats Wounded Iranian IRGC Fighters News China Launches Largest Ever Aircraft Carrier Arts & Culture "Jurassic World Rebirth" Gets Streaming Date Sports Former Al Zamalek Player Ibrahim Shika Passes away after Long Battle with Cancer Videos & Features Tragedy Overshadows MC Alger Championship Celebration: One Fan Dead, 11 Injured After Stadium Fall Lifestyle Get to Know 2025 Eid Al Adha Prayer Times in Egypt Arts & Culture South Korean Actress Kang Seo-ha Dies at 31 after Cancer Battle News "Tensions Escalate: Iran Probes Allegations of Indian Tech Collaboration with Israeli Intelligence" Sports Get to Know 2025 WWE Evolution Results News Flights suspended at Port Sudan Airport after Drone Attacks
