Salient to Investors: Padhraic Garvey at ING Bank said yields will stay low as growth remains weak. Carl Lantz at Credit Suisse said 10-yr yields will fall to a record 1.35 percent by Dec. 31. Bloomberg survey of economists predict the 10-yr yield will rise to 1.80 percent by Dec. 31. Bank
READ MORE... →Salient to Investors: Joyce Chang at JPMorgan Chase said QE3 puts emerging-market corporate and sovereign debt in a sweet spot by reducing bond supply and prompting investors to seek higher-yielding debt – modest borrowing by emerging-market governments and companies has avoided a supply glut. Chang favors commodity-related currencies including the Russian ruble, Mexican peso and
READ MORE... →Saient Points: Charles Plosser at FRB of Philadelphia said QE3 won’t boost growth or hiring and may jeopardize the Fed’s credibility, which may be forced into selling assets in the open market when it needs to reduce stimulus. Central banks can’t effectively target employment levels the same way they can guide inflation rates
READ MORE... →Salient to Investors: Malcolm Polley at Stewart Capital said things won’t improve as fast as people think, and Fed’s actions won’t lead to higher growth. FRB of Philadelphia President Charles Plosser said this months new bond buying by the Fed won’t boost growth or hiring and may jeopardize Fed credibility. The Dow is 5.3 percent from its
READ MORE... →Salient to Investors: U.S. investors are buying Treasuries at a faster pace than foreigners for the first time since 2010. Tom Graff at Brown Advisory said bonds have stopped being a total-return market as high uncertainty has caused excess cash to build up among household assets as individuals seek safety over return. Foreign investors own 50.4
READ MORE... →Salient to Investors: Since 1926, intermediate US government bonds earned about 2.5% above inflation, stocks about 7% above inflation. Currently TIPS yield negative 0.5%. Assuming stocks continue to outperform bonds by 4.5%, then future real returns on stocks will only be 4%, and on a 60-40 balanced portfolio will only be 2.5%. Therefore, central
READ MORE... →Salient to Investors: Jason Rogan at Guggenheim Partners said the economy is not double-dipping into another recession,but growth is not robust. Thomas Roth at Mitsubishi UFJ Securities USA said low volatility is not going to go away. Hedge-fund managers et al reversed to a net-short position in the week ended Sept. 18. David Coard at Williams Capital
READ MORE... →Salient to Investors: EPFR Global report junk-bond funds saw inflows of $3.63 billion last week, the biggest rise since the week ended Oct. 26 2011 – Junk ETFs accounted for 40 percent of all U.S. flows. Matthew Tucker at BlackRock said more institutional investors are buying ETFs causing a scarcity of bonds. Most bond proceeds
READ MORE... →Salient to Investors: Options traders are paying record prices to protect against swings in long-term U.S. Treasuries relative to stocks amid concern inflation will accelerate. The ratio between implied volatility for contracts closest to the iShares Barclays 20+ Year Treasury Bond Fund and the SPDR S&P 500 ETF Trust reached the highest since
READ MORE... →Salient to Investors: FRB Dallas President Richard Fisher said: QE3 won’t work due to Congress inaction and excessive government regulation, which are holding back hiring and investment Residential real estate is a recent bright spot QE3 risks higher inflation – if you allow higher prices, how credible are you in clawing them back? Read the full article
READ MORE... →