Tue, Mar. 31, 10:03 AM
- In what would be the longest winning streak in more than a decade, U.S. Treasury bonds are on pace for their fifth straight quarterly price gain, with the yield on the 10-year note of 1.95% comparing to 2.17% at the year's start.
- The last time the yield fell for five straight quarters was March 2001.
- Overall, the Treasury market has punched out a total return in Q1 of 1.48% following a return of 5.05% in 2014.
- The Fed is hellbent on tightening monetary policy, but - as good as long-term Treasurys have performed - the yield differential with the rest of the developed world continues to grow and continues to drive foreign money to U.S. shores. Ten-year Bunds are yielding 0.191%, 10-year Gilts 1.57%, and Spain and Italy 10-year paper yields less than 1.3%.
- The March employment report is set for release on Friday morning.
- Previously: Chicago PMI at the lowest level since 2009 (March 31)
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, UST, UBT, TLO, PLW, VGIT, GOVT, TBX, GSY, TENZ, SCHR, DTYL, TYD, LBND, ITE, TYBS, DLBL, DFVL, FIVZ, TBZ, DFVS, TYNS, TAPR, SYTL
Mon, Mar. 23, 12:38 PM
- The latest sign of the Fed walking back its hawkish attitude is a speech today from Vice Chairman Stanley Fischer at which he reiterates a rate hike is coming, but insists there are no plans - at this time - for a steady upward climb in the fed funds rate a la 2004-2006 (when the Greenspan/Bernanke Fed hiked 25 bps at just about every meeting).
- "A smooth path upward in the federal funds rate will almost certainly not be realized, because, inevitably, the economy will encounter shocks--shocks like the unexpected decline in the price of oil, or geopolitical developments that may have major budgetary and confidence implications, or a burst of greater productivity growth, as the Fed dealt with in the mid-1990s."
- ETFs: SHY, BIL, STPP, VGSH, PLW, SHV, GOVT, FLAT, SCHO, DTUS, SST, DTUL, TUZ, TAPR, TFLO, USFR
Wed, Mar. 18, 4:34 PM
- Goldman economist Jan Hatzius: "Our forecast remains for a September hike, but the risks now appear slightly skewed toward a later liftoff."
- Source: David Wessel
- Previously: Day's biggest news: Fed sharply cuts "normal" unemployment rate (March 18)
- Previously: FOMC drops "patient," but sends dovish signal (March 18)
- ETFs: AGG, BND, BOND, SCHZ, STPP, LAG, PLW, GOVT, FLAT, SAGG, GBF, FBND, IUSB, TAPR, VBND
Tue, Mar. 10, 10:31 AM
- Sliding stock prices will trump strong economic numbers any day. The U.S. 10-year Treasury yield shot up to 2.25% following Friday's nonfarm payroll beat, but it's returned all the way to 2.12% thanks to another sharp decline in the major equity averages.
- The S&P 500 and the DJIA have both turned negative for the year.
- And U.S. yields positively tower over those in Europe. The German 10-year yield is all the way down to 0.20%. Italy's at 1.23%, and Spain's at 1.25%.
- Want to put your money in German 5-year paper? It'll cost you 11 basis points per year to do so.
- TLT +1.05%, TBT -2.1%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, VGLT, DLBS, UBT, TLO, PLW, GOVT, BUNL, ITLY, TENZ, LBND, ITLT, GGOV, DLBL, TYBS, BUNT, TAPR
Tue, Feb. 10, 1:26 PM
- The Richmond Fed's Jeff Lacker is ready to move in June - not a huge surprise given his hawkish leanings - but more interesting is the more dovish John Williams of San Francisco who says a June rate hike is very much on the table.
- Williams is looking right through the soft inflation numbers - calling them transitory - and instead focused on tightening labor markets. It's better to be preemptive, he says, rather than falling behind and needing to hike rates in a more dramatic fashion later.
- ETFs: SHY, BIL, STPP, VGSH, PLW, SHV, GOVT, FLAT, SCHO, DTUS, SST, DTUL, TUZ, TAPR, TFLO, USFR
Tue, Jan. 27, 12:45 PM
- Recalling the Fed's premature tightening of policy in 1937, Jeff Gundlach is worried the Yellen Fed could do the same. A June rate hike is "particularly dangerous," says Gundlach, as the data - particularly inflation numbers - look to be going in the opposite direction. The reason for the Fed's zeal to hike rates, says Gundlach, is its desire not be at zero when the next recession hits.
- "The consensus is that [10-year yields] will end the year 100 basis points higher ... It's amazing the triumph of hope over experience ... I think it's obvious the world is dealing with a deflation situation."
- Inside ETFs Conference notes
- As for the ECB's QE, count Gundlach as unimpressed ... No surprise given his opinion of the U.S. and Japanese QE efforts.
- ETFs: IEF, PST, IEI, TYO, DTYS, UST, STPP, PLW, VGIT, GOVT, FLAT, TBX, GSY, SCHR, DTYL, TYD, ITE, DFVL, TBZ, FIVZ, DFVS, TYNS, TAPR, SYTL
Tue, Jan. 13, 4:17 AM
- Treasuries advanced for a third day, with U.S. 10-year notes hovering near their lowest level since May 2013. The 10-year yield is down 4 bps at 1.87%.
- "It’s all about oil," said Ali Jalai, a bond trader at Bank of Nova Scotia. "Inflation expectations keep coming down. That’s forcing the bond market to rally."
- Japan’s five-year yield fell to zero for the first time today, while the country's 10-year yield and Australia’s 15-year yield also dropped to new records.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, BIL, UST, UBT, STPP, TLO, VGSH, PLW, VGIT, GOVT, SHV, TBX, FLAT, SCHO, GSY, SCHR, TENZ, DTYL, TYD, LBND, ITE, DTUS, SST, TYBS, DLBL, DTUL, TUZ, DFVL, TBZ, FIVZ, DFVS, TYNS, TAPR, TFLO, USFR, SYTL
Sat, Jan. 3, 9:14 AM
- In what's become an annual rite of passage, long-dated U.S. Treasurys top most prognosticators' lists of what not to own in the coming year. Jeff Gundlach doesn't make the big money by following the crowd, though, and he thinks the 10-year Treasury yield in 2014 could take out its 2012 low of 1.38% (it closed at 2.11% last night) - this even as the Fed hikes short-term rates.
- Deflationary forces are still in charge, Gundlach tells Barron's, and could even strengthen if oil continues to decline. “Look, commodity prices have fallen back to their lows of 2009, which of course was at the height of the financial crisis. Something is obviously very wrong these days in the global economy.”
- As for demand for U.S. paper now that the Fed has stopped QE, it's coming from overseas as nominally low U.S. yields positively tower over what's available domestically to investors in Germany, Japan, the U.K., and yes, Italy and Spain.
- Gundlach's DoulbeLine Total Return Fund (MUTF:DBLTX) - with $40B in AUM - and DoubleLine Core Fixed Income (MUTF:DBLFX) both finished in the top decile of their Morningstar groups in 2014.
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, VGLT, DLBS, UBT, STPP, TLO, PLW, GOVT, FLAT, TENZ, LBND, TYBS, DLBL, TAPR
Dec. 1, 2014, 11:04 AM
- "Lowflation" - inflation running at below-target rates - will be the major theme for the next twelve months, says Morgan Stanley's Joachim Fels, presenting his bank's 2015 global outlook. "Markets no longer believe that central banks will be able to bring inflation back to target any time soon. The longer this lasts, the more self-fulfilling these prophecies become."
- For evidence, look no further than the U.S. 10-year Treasury yield plumbing new lows on a daily basis (2.17% at last check) despite better economic growth data and promises of rate hikes in mid-2015. Then there's Germany (0.69%), Italy (1.99%), Spain (1.83%), and the U.K. (1.89%).
- Taking a variant viewpoint to most in the business, Morgan Stanley sees no Fed rate hike in 2015. As for the ECB, the bank puts the chances of full-blown QE at 50%, up from 40% previously. Easier policy should also be coming from central banks in China, India, and South Korea.
- ETFs: AGG, BND, BOND, SHY, SCHZ, BIL, VGSH, LAG, PLW, SHV, GOVT, SCHO, SAGG, DTUS, DI, GBF, SST, DTUL, FBND, TUZ, LDUR, FWDB, IUSB, TAPR, VBND
Nov. 24, 2014, 12:44 PM
- It's not about economic fundamentals, says Jeff Gundlach, but the Fed will be forced to hike rates next year because it's what's expected. "The Fed should not be raising interest rates, and yet they don't want to be at zero, they're in a conundrum ... They might raise rates just to see what happens."
- As for the long end, Gundlach's big bat is on a flattening of the curve sometime in the next year of two "at a level previously thought unthinkable."
- Gundlach's Total Return Fund (DBLTX, DLTNX) is on a roll, with nine straight months of inflows, including about $4B in the few weeks following Bill Gross' departure from Pimco.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, BIL, UST, UBT, STPP, TLO, VGSH, PLW, VGIT, SHV, GOVT, FLAT, TBX, SCHO, GSY, TENZ, DTYL, SCHR, TYD, LBND, ITE, DTUS, TYBS, DLBL, SST, DTUL, TUZ, DFVL, FIVZ, TBZ, DFVS, TYNS, TAPR, SYTL
Nov. 19, 2014, 2:25 PM
- Stocks enjoyed a brief bump after the release of the Fed meeting minutes, but the leading indexes have returned to slight losses: Dow -0.1%, S&P -0.3%, Nasdaq -0.5%.
- Treasury prices ticked up, pushing the yield of the benchmark 10-year note lower to 2.335%.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DTYS, DLBS, TYO, VGLT, BIL, UST, STPP, UBT, PLW, SHV, VGIT, TLO, GOVT, FLAT, VGSH, TBX, SCHO, GSY, TENZ, SCHR, DTYL, LBND, ITE, TYD, DTUS, TYBS, SST, TUZ, DTUL, DLBL, TBZ, FIVZ, DFVL, DFVS, TYNS, TAPR
Nov. 19, 2014, 9:58 AM
- Alan Greenspan called it a "conundrum," but some just saw it as another failure of the Fed's central planning.
- “We wanted to control the federal funds rate, but ran into trouble because long-term rates did not, as they always had previously, respond to the rise in short-term rates,” recently said the Maestro, harking back to the middle of the last decade when yields at the long end of the curve fell despite the stomping of Greenspan's feet.
- Today's crop of bond investors is again betting on the market instead of the Fed, taking long-term rates down even as central bankers prep hikes on the short end. A rising short end combined with a stable or falling long end could quickly lead to an inverted yield curve, "turn(ing) credit creation on its head," says economics professor Tim Duy. "I'm sort of wondering what's the game plan here."
- One tool today's crop of central bankers has that Greenspan didn't: A $4.49T portfolio accumulated thanks to three rounds of QE. A sale of some of those assets could be a way to lift long-term rates, suggests Barclays' Michael Gapen. Ugh.
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, UST, UBT, TLO, PLW, VGIT, GOVT, TBX, GSY, TENZ, DTYL, SCHR, TYD, LBND, ITE, DLBL, TYBS, TBZ, DFVL, FIVZ, DFVS, TYNS, TAPR, SYTL
Oct. 27, 2014, 1:09 PM
- Busy fighting the financial crisis six after it happened, regulators are doing an excellent job laying the groundwork for the next one as evidenced by the panicky action in Treasurys on October 15. It was on that morning when the 10-year Treasury yield in the space of a few minutes tumbled to 1.90% from 2.20%, before ending the session at 2.15% (for those who don't play in fixed-income, U.S. Treasury yields very rarely ever move that much).
- The panic buying in Treasurys also leaked over into jumpy selling in stock index futures.
- "It was like turning the clocks back to pre-electronic trading," says Charles Comiskey, head Treasury dealer at Scotiabank. "Once we recognized things started getting out of control, we shut [the electronic trading system] off immediately."
- Laser-focused on forcing banks to cut back on risk, regulators have forced lenders to vastly scale down their inventory of bonds, and the thinner markets make outsized moves more likely. JPMorgan estimates the amount of Treasurys available to trade at one time without moving prices has plunged 48% to just $150M since April.
- “There’s a thin line to keeping the customer happy while also giving a level that you can at least get out of without taking a big loss right away,” says Guggenheim's Jason Rogan, whose firm also shut off the machines that morning.
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, DLBS, VGLT, UBT, TLO, PLW, GOVT, TENZ, LBND, TYBS, DLBL, TAPR
Oct. 22, 2014, 10:30 PM
- "Everyone is always saying rates will rise; it is almost comical,” says Jeff Gundlach, speaking at ETF.com's Inside Fixed Income conference. It's a mistake looking at past economic recoveries as a template for this one, he says, because persistent deflation - owing to a number of factors - makes this cycle different.
- While the Fed realizes QE doesn't do a lot of good and is ending it, he adds, the central bank has no reason to hike rates anytime soon.
- Gundlach never sticks with just fixed income, and this time he turns to oil, which he believes is headed far lower. "I'm convinced Saudi Arabia wants oil at $70. They love turning the screws on people who mean them harm in the Middle East." Seventy dollar oil, however, will also hurt the booming energy sector here in the States as fracking is hardly worth it at that price.
- DoubleLine chart of breakeven oil price for a number of producers
- DoubleLine Total Return Bond Fund: DBLTX, DLTNX
- Treasury ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, VGLT, DLBS, UBT, TLO, PLW, GOVT, TENZ, LBND, TYBS, DLBL, TAPR
- Oil ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, USL, UWTI, DNO, DWTI, SZO, OLO, OLEM, TWTI
Oct. 15, 2014, 9:35 AM
- No need to do a double-take. The 10-year Treasury yield is now lower by 20 basis points to 2.00%, with clearly something more at work than a couple of weak economic reports.
- Germany goes full Japan, with 10-year Bund yields lower by nine basis points to 0.71%, and U.K. 10-year Gilt yields are down 16 bps to 1.98%.
- Previously moving lower in lockstep with Germany, peripheral yields don't keep up today. Spanish 10-years are up four bps to 2.14% and Italy's are up 14 basis points to 2.45%.
- Previously: Treasury yields tumble after weak data; S&P futures down 1%
- TLT +2.8%
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, DLBS, DTYS, VGLT, UST, UBT, TLO, PLW, VGIT, GOVT, TBX, GSY, TENZ, SCHR, DTYL, TYD, ITE, LBND, TYBS, DLBL, TBZ, FIVZ, DFVL, DFVS, TAPR, TYNS
Oct. 14, 2014, 7:34 AM
- The 10-year Treasury yield falls all the way to 2.19% in morning action, a fresh 16-month low, and the 30-year yield has fallen below 3%.
- Just for perspective, the yield on one of the world's more hated asset classes (the 10-year Treasury) stood at around 3% at the start of the year. The TLT ETF has gained 18.6% YTD and is up another 0.9% premarket.
- At work in addition to sliding equity markets are rising deflation fears across the pond - the German 10-year Bund yield slides five basis points to a fresh all-time record low of 0.80%, and 10-year Gilt yields are down eight basis points to 2.09% amid weak CPI numbers.
- Previously: U.K. inflation falls to five-year low
- Previously: Italy, Spain CPI exacerbate eurozone deflation fears
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, DLBS, DTYS, VGLT, UST, UBT, TLO, PLW, VGIT, GOVT, TBX, GSY, TENZ, DTYL, SCHR, ITE, TYD, LBND, TYBS, DLBL, TBZ, FIVZ, DFVL, DFVS, TAPR, TYNS
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The PowerShares 1-30 Laddered Treasury Portfolio (Fund) is based on the Ryan/Mergent 1-30 Year Treasury Laddered Index (Index). The Fund will normally invest at least 90% of its total assets in securities that comprise the Index. The Index measures the potential returns of the U.S. Treasury yield curve based on approximately 30 equally weighted U.S. Treasury issues with fixed coupons, scheduled to mature in a proportional, annual laddered structure. The Portfolio does not participate in Treasury Bills, Treasury Inflation Protected Securities (TIPS), or zero-coupon securities (STRIPS).
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