By , January 16, 2015
In 2014, the investment community was shocked by the further decline of U.S. interest rates. As the Fed started pulling back stimulus, it was thought by many industry experts that yields would begin to climb back to a normal range. However, the opposite occurred. One speculative thesis is that rates are being held down by the purchase of U.S. Treasuries by foreign investors. The logic is that even though rates are incredibly low from a historical standard in the U.S., yields are still higher than similar securities in other developed markets (like Europe).
Let’s look at the net purchases of Treasuries by foreign investors over the last 10 years and compare that to the 10-yr Treasury yield…
From the data, it appears the foreign purchases have little impact on yields longer term. Even the dramatic spike in purchases from 2009-2010 didn’t cause a meaningful collapse of rates from the trend. Still, from the start of 2014, the spike in purchases could certainly have affected the decline in rates to some degree. However, I would surmise the correlation is somewhat spurious and the real reason(s) for the decline in U.S. Treasury yields lies elsewhere.
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April 24, 2017
April 24, 2017
The start of the year saw a continuation of positive returns in the first quarter as global markets speculated on a spark in world growth initiated by the election of Donald Trump in the United States. Trump’s unique background and style suggested that the new president would be able repair some of the historically wide rift that has separated Republicans and Democrats.
January 12, 2017
During the first quarter, U.S. equities continued the strong advance experienced during the fourth quarter of 2016.
For the three months ending March 31st, the Dow Jones Industrial Average posted a 4.6% gain while the S&P 500 Index rose 5.5%. The stock market has been resilient due to robust corporate earnings as well as employment growth and positive economic data which have undergirded this upward advance.
Equity markets finished 2016 on a high note as markets rallied on a shocking surprise in the U.S. election. The election of Donald Trump for President of the United States was the most recent example of “low probability” events actually occurring and disrupting markets. This happened a few times in 2016, but none so dramatic as the Trump victory.