US bond investors wake up to QE withdrawal

June 1, 2013 Leave a comment

Last updated: May 31, 2013 9:54 pm

US bond investors wake up to QE withdrawal

By Ralph Atkins in London and Michael MacKenzie in New York

What is the difference between 1.6 per cent and 2.2 per cent? Either: not much, or a potentially explosive shift in the way global investors view the world that presages turbulent market conditions ahead.

Yields on US government debt, which move inversely to prices, have surged during May and peaked this week, leaving holders nursing their worst monthly loss since December 2010. Ten-year Treasury yields hit 2.23 per cent on Wednesday, up from 1.61 per cent at the start of May, and were back to 2.20 per cent in volatile Friday trading. Read more of this post

Filed under Macro Trends

A New Twist in Monetary Policy: Divergence Between Emerging and Developed Markets; Emerging markets are cutting interest rates in response to disinflation and slowing growth while investors speculate on an early exit, or taper, by the Fed

June 1, 2013 Leave a comment

A New Twist in Monetary Policy: Divergence Between Emerging and Developed Markets

31 MAY 2013 – TOM BUERKLE

For the past five years, policymakers in emerging-markets countries have criticized their U.S. counterparts, arguing that the Federal Reserve Board’s zero interest rates and quantitative easing have flooded the world with cheap money, pushed up asset prices and fanned inflationary pressures in their economies. Japan’s recent entry into the QE club merely generated more such complaints.

Behind that chatter, however, a significant shift is taking place. Advanced economies and emerging markets remain out of sync, but with a twist: While investors are increasingly speculating that the Federal Reserve Board will begin exiting or tapering its easy-money policies sooner than expected this year in response to stronger growth, emerging markets have been cutting rates lately in the wake of a slowdown in growth and waning inflation pressures. Many analysts and investors believe this new trend has plenty of room to run. Read more of this post

Filed under Macro Trends

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