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  • Hello, and welcome back to the Note.

  • We had a very dramatic rebound in European banking stocks at the start the day, today.

  • Not surprising given how far they had sold down,

  • and then we had the much awaited testimony from Janet Yellen's congress

  • where she did a very good job of not creating any new news.

  • Basically, the message is that there could well still be more rate rises to come this year,

  • if the economic data support it.

  • Not the faintest hint that we could be heading towards negative rates as many now fear.

  • Now that led to quite a positive reaction from the markets at first,

  • but by the end of the day, the forces that have been dominating for a while came back to predominate.

  • If we take a look at this chart,

  • it shows you the yields curve, the spread of 10-over 2-year treasury yields,

  • you can see that we have now dropped below a hundred basis points for the first time since the crisis.

  • It's a very precipitate fall we've seen in the last few weeks,

  • and on the face of it, it is a clear signal that the market is worried about possible recession coming.

  • It's when you begin to expect that there won't be any great rise in interest rates in the future,

  • that you're thinking that there's gonna be low growth and low inflation.

  • Now, there is a clear explanation for why this is going on; however,

  • which is the ongoing reaction to the monetary policies of the European Central Bank and the Bank of Japan.

  • If we take a look at this next chart, it shows you 10-year government yields for the USD eurozone in Japan.

  • You can see that in Japan following the Bank of Japan's surprising move at the end of last month.

  • Interest rates on 10-year are actually negative.

  • And we all know that Japan has been in a slump for a very long time,

  • but that's actually, as you can see, a new development.

  • Similarly, you've seen German bonds yields fall back down again.

  • It's no surprise therefore that long treasury yields are also coming under pressure if you've got that kind of competition,

  • it's not surprising even the low yields aren't offered here in the States.

  • Appealing that in turn will push the yield down further.

  • As a result, by the end of the day, we saw the dollar fall significantly once more.

  • As for the stock markets yesterday, it was almost flat but rallied into the close, keep making people feel more optimistic.

  • This time, it was almost flat but fell into the close,

  • probably signaling that after the bounce back at banks, after we've got through Yellen's testimony

  • we will get back to a continued rather great angst.

Hello, and welcome back to the Note.

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B1 中級

よりフラットに、より低く|オーサーズノート (Flatter and lower | Authers' Note)

  • 44 3
    Kristi Yang に公開 2021 年 01 月 14 日
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