Thursday, February 14, 2019 |
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| MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Kevin Doyle • Lonnie Harris • Mark Tranckino • Robert Schuyler • Tom Toburen • Josh Kiefer Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer • Chuck Honeywell • Gus Koppen |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 02/07/19 | 2.43 | 2.42 | 2.49 | 2.55 | 2.48 | 2.46 | 2.46 | 2.54 | 2.65 | 2.85 | 3.00 |
| 02/08/19 | 2.43 | 2.43 | 2.49 | 2.54 | 2.45 | 2.43 | 2.44 | 2.53 | 2.63 | 2.82 | 2.97 |
| 02/11/19 | 2.44 | 2.45 | 2.51 | 2.55 | 2.48 | 2.47 | 2.47 | 2.56 | 2.65 | 2.85 | 3.00 |
| 02/12/19 | 2.42 | 2.43 | 2.50 | 2.55 | 2.50 | 2.48 | 2.49 | 2.58 | 2.68 | 2.87 | 3.02 |
| 02/13/19 | 2.42 | 2.44 | 2.51 | 2.55 | 2.53 | 2.52 | 2.53 | 2.61 | 2.71 | 2.89 | 3.04 |
Renewed Rumblings of the “R” Word
What a roller coaster ride we’ve had in both the bond and stock markets since the calendar rolled us into the 4th quarter of last year! With the stock market experiencing its worst quarter in a decade, the Dow bottomed at 21,792 on Christmas Eve and then proceeded to roar back with a gain of over 3,700 points.
At the same time the bond market was going through a few gyrations of its own. On October 5th the benchmark 10 year Treasury yield peaked at 3.23% and Jamie Dimon of JP Morgan Chase announced it was headed to 5%. Since then the 10 year has fallen precipitously, reaching a recent low yield of 2.55% on January 3rd, then settling into a 2.65% - 2.75% trading range.
Today many of the same concerns of last quarter remain:
At the same time the bond market was going through a few gyrations of its own. On October 5th the benchmark 10 year Treasury yield peaked at 3.23% and Jamie Dimon of JP Morgan Chase announced it was headed to 5%. Since then the 10 year has fallen precipitously, reaching a recent low yield of 2.55% on January 3rd, then settling into a 2.65% - 2.75% trading range.
Today many of the same concerns of last quarter remain:
- global growth slowdown
- flattened yield curve
- trade tensions
One concern that has diminished is that of continued monetary tightening and similar Fed intervention. Last month Chairman Powell provided the markets with the “Powell Pause” and a lecture on “patience” in the wake of a “no action” FOMC meeting. Presently, Fed Funds futures prices in no change to the benchmark rate this year and suggests a rate cut in mid-2020.
So if Chairman Powell can’t deliver an economic “soft landing” could a recession be looming in our future? Several economic notables think so. This week Kyle Bass, the founder of Hayman Capital Management, said the U. S. will likely enter a mild recession by the middle of 2020. Scott Miner of Guggenheim partners said the same last week with a late 2020 prediction. Additionally, last week the New York Federal Reserve released its recession probability gauge and it measured the highest likelihood for a recession within the next 12 months since 2008. Lastly, the Federal Reserve Bank of Dallas President Robert Kaplan said that the yield curve was sending cautionary signals on growth and that economic and financial uncertainties merit close watching.
With these opinions in mind and with other economists and Federal Reserve officials seeing slower growth this year than previously expected, is it possible that 10 year Treasury yields may have already peaked? No one knows but it is certainly possible. Is your portfolio positioned properly with bullets, call protection and positively convexed bonds? We can help. Please call your CCB Capital Markets Representative for an in depth discussion.
So if Chairman Powell can’t deliver an economic “soft landing” could a recession be looming in our future? Several economic notables think so. This week Kyle Bass, the founder of Hayman Capital Management, said the U. S. will likely enter a mild recession by the middle of 2020. Scott Miner of Guggenheim partners said the same last week with a late 2020 prediction. Additionally, last week the New York Federal Reserve released its recession probability gauge and it measured the highest likelihood for a recession within the next 12 months since 2008. Lastly, the Federal Reserve Bank of Dallas President Robert Kaplan said that the yield curve was sending cautionary signals on growth and that economic and financial uncertainties merit close watching.
With these opinions in mind and with other economists and Federal Reserve officials seeing slower growth this year than previously expected, is it possible that 10 year Treasury yields may have already peaked? No one knows but it is certainly possible. Is your portfolio positioned properly with bullets, call protection and positively convexed bonds? We can help. Please call your CCB Capital Markets Representative for an in depth discussion.
This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.
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