Wednesday, 15 February 2017

S&P 500 at another record high but Treasuries stuck in trading range

Markets were mixed on Tuesday.

The S&P 500 rose 0.4 percent to a record high for a fourth consecutive day.

However, the STOXX Europe 600 rose less than 0.1 percent and the Nikkei 225 fell 1.1 percent.

US Treasuries also fell after Federal Reserve Chair Janet Yellen said waiting too long to raise interest rates “would be unwise”. Yields across the curve rose by 3-5 basis points, with the 10-year settling around 2.47 percent.

Still, a Bloomberg article points out that the 10-year Treasury yield “have been stuck in a 25-basis-point range this year”.

“It’s possible we get to a 3.5 percent 10-year yield,” Rick Rieder, chief investment officer of global fixed-income at BlackRock Inc., was quoted as saying. “But it’s hard to envision it getting much higher than that, particularly with the aging population, demographics and the potential for growth in the rest of the developed world.”

Indeed, Rieder warned that “if there is disappointment on the fiscal front and a view that we’re not going to get progress on fiscal initiatives, there’s no doubt we can trend to lower yields, even approaching 2 percent”.

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