Episode 9 – Questions, Questions, Questions
- Weekly Change in 10 Year Government Yields
| 01/10/20 | 08/10/20 | |
|---|---|---|
| 10 Year US Treasury | 0.68% | 0.77% |
| 10 Year Gilt | 0.23% | 0.30% |
| 10 Year EURO (Bund) | 0.52% | 0.52% |
| 10 Year EURO (BTP) | 0.87% | 0.77% |
Are Bond markets starting to tell us something about the divergent pace of economic recoveries around the world? Or perhaps some people are finally starting to understand that giving Government largesse to people directly, rather than relying on the banking system to do the right thing, might be a way of actually creating a little growth (and, whisper it quietly, inflation) ?
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Likely direction of food prices with an interrupted harvest season and disrupted supply chain? Soyabeans +8.5% for the month, Corn 11.5% and Wheat 15%. Looking good Billy Ray.
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Talking inflation, will Central Bank’s be able to apply the usual treatment of higher interest rates when surging debt to GDP ratios constrain their ability to finance the cost of rolling over debt, when bond yields spike in response? Or is the realisation growing that inflation is the feature, not the bug, that enables the debt mountain to be reduced? 5 Year US treasuries at 0.33% tell you how perturbed bond investors are about the inflation monster (or more accurately Central Banks’ likely response).
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Biden carrying an 8% lead in the US Presidential polls ? At this point 4 years ago, Clinton was 11 points ahead, had a 95% chance of victory, and Reuters / IPSOS gave a projected electoral college outcome of 326 Clinton / 212 Trump. So welcome back President Trump by the looks of it.
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The rally is global stocks is finally showing signs of widening outside of tech. Best performing sector over the week was Financials (+4.1%). Which is also the worst performing sector over the last 12 months, down 11.1% versus a 13% rise in the broad index over the same period.