Bond markets: anachronistic sell-off

Saturday, February 03, 2018 // Written by Enzio von Pfeil

Buy into bond market weakness: inflation is a chimera

  1. Why do you not think the bond bear market has begun?
    1. rear view mirror. because the market is driving by looking into the rear-view mirror of wage-push inflation ; this is a thing of the past.
    2. “old normal”  Thus, buy into bond  price dips: the inflation of old is cannot return on account of globalisation, demography and technology: we are returning to the “old normal”

  1. Does the huge supply of US treasuries coming almost guarantee higher rates?
    1. NO.  :  Attractive yield differential US Treasuries vs foreign government bonds of similar life.
    2. German 10 year bunds (0.63%) are yielding about ONE QUARTER of equivalent  US Treasuries (2.72%) 
    3. Japanese 10 year JGBs (0.07%) are yielding  ONE THIRTY THIRD of equivalent  US Treasuries  (2.72%)! 
    4. What will happen.  This suggests that if anything, foreign, yield-hungry investors such as the Chinese, Germans and Japanese will snap-up that fresh supply of higher-yielding, safe US government paper

  1. Most interesting trends in earnings this season
    1. Little to comment, except that with America’s Economic Time® looking good, so must her earnings outlook look good.

  1. Do you believe in the push to make Chinese SOEs more efficient and profitable?
    1. Sure: in a command economy, anything can be decreed.
    2. This Diktat will be implemented via the fudging of numbers, to make SOEs’ profits appear to be better than they actually are.
    3. This will cost SOEs in credibility when it comes to placing them as shares, or raising capital for them in the bonds markets.


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