Global shares fragile, US yields creep up after US budget deal

Global shares fragile, US yields creep up after US budget deal

Global shares fragile, US yields creep up after US budget deal

The largest point drop was just three days earlier, when the Dow plunged 1,175 points.

Shares have headed south again on Wall Street. "Is there more inflation down the road than we're expecting?"

"I would think that this continues to happen for the next few trading sessions for everything to kind of get flushed out".

Boockvar said the USA bond market is responding to rising German bund yields, which are expected to keep rising.

Jim O'Neill, Former Commerce Secretary in the United Kingdom government, on Monday said the U.S. is growing and the central bank may need to tighten monetary policy faster than the market has perceived.

"This is how we started, go back to Friday and this is exactly where we were", said Art Hogan, chief market strategist at B. Riley FBR in NY. "Once yields rise to a certain level, stock investors begin to get attracted to low-risk bond yields instead of higher-volatility stock investments, and contributing to that are equity valuations above historic averages". A higher fiscal deficit forces the government to go for higher market borrowings.

Alexandra Coupe, associate director investment manager PAAMCO, said rising inflation made stocks less attractive. With stock prices at near all-time high levels, if one seeks a "risk premium" of say 6 per cent, at prevailing bond yield of 7.56 per cent, the stocks need to give 13.56 per cent returns; which does not look feasible.

"I think there's going to be an interplay between equities and rates probably for the next several months, until we get greater clarity on how the overall growth outlook is going to be and if the Fed is thinking about shifting the reaction function", said Mark Cabana, head of USA short rates at Bank of America Merrill Lynch.

Albas: BC-Alberta trade war needs to be diffused
Wednesday saw Quebeckers hold a "mass purchase in solidarty to stop Kinder Morgan" at an SAQ public liquor store in Montreal. About a third of the winery's vintages are sold to customers in Alberta, according to McWatters Bond.

Analysts are attributing this fall to rising global bond yields, which have unsettled investors and central banks the world over.

"But it doesn't do much for predicting short-term moves". That's why everybody is going back and forth. We are watching inflation which is rising. "Be careful what you wish for". Schumacher said the Treasury is expected to have net issuance of more than $600 billion in notes and bonds for the 2018 calendar year, and about $1 trillion if Treasury bills are included. When bond prices go lower, their yield increases.

Yields in the belly of the curve are down about 10 basis points. "As it approaches 3 per cent, concerns about inflation and competition for stocks by fixed income securities are increasing".

Policy accommodation has helped the cost of servicing debt for companies in the S&P 500 fall to an all-time low of 3.5 per cent of sales over the past 12 months, according to data compiled by Bloomberg.

"If we see 3.0 percent next week that is going to spook people more - the equity market psyche is fragile at this point". The comments were highly unusual for a Treasury secretary and came on top of new protectionist tariffs on solar panels and washing machines - and thus seen as part of a bigger policy agenda. Social-media company Twitter posted its first profit, and Yum Brands, Cardinal Health and Tyson Foods also exceeded earnings expectations.

There are speculations that the US Fed may turn hawkish, if inflation hits the target of 2 per cent growth. Investors worry that businesses' profit parade will slow down. "There is an emerging inflation story in the United States - and rising U.S. inflation makes monetary policy less predictable".

LPL Research released a report titled "Volatility is Back", which pointed to fear of rising interest rates as the source of the recent swings but cautioned that the economy is fundamentally strong.

He said the Fed's most recent forecast, in December, of three more small increases in the central bank's benchmark short-term interest rate "still seems like a very reasonable projection", he said.

Related news