As much as the rise in bond yields has been talked about by financial markets over the past two weeks, there is something different about how public debt reacts to signs of an improving economy.
According to the BlackRock Investment Institute, a 1% increase in ten-year equilibrium inflation rates in the United States (a measure of market inflation expectations) has typically led to a 0.9 year increase. % of 10-year Treasury yields since 1998. But since March 2020, yield inflation has risen 1.2% and nominal yields have risen only 0.5%.
“We expect a strengthened economy, strong fiscal momentum and rising inflation to further increase nominal yields this year, albeit less than in similar periods in the past. We expect central banks to lean against any market concerns about rising debt levels and keeping interest rates low for now, ”strategists at the world’s largest fund manager said.
On Monday, European Central Bank President Christine Lagarde said the central bank was closely monitoring bond yields, while Federal Reserve Chairman Jerome Powell told the Senate Banking Committee on Tuesday that the increase in bond yields “was in a way a statement of confidence” that there will be a robust and complete economic recovery.
BlackRock strategists compared U.S. retail sales to past recessions. “The different nature of the COVID shock means that activity has resumed much more quickly than was seen in previous recessions in the business cycle, and involves unusually high growth rates as a vaccine-led reopening unfolds. “, said.
BlackRock offers views on both long-term strategic vision and 6-12 month tactics. But for both equities and government bonds, they changed their strategic and tactical views by the same magnitude, citing the launch of the COVID-19 vaccine and the U.S. fiscal stimulus. BlackRock said it has low government bonds “as its ability to act as portfolio ballasts is reduced with yields close to the lower limits and rising debt levels may end up posing risks to the interest rate regime. low “.
BlackRock returned overweight to the shares. “We see a better outlook for profits amid moderate valuations. The incorporation of climate change into our expected yields illuminates the attractiveness of developed market actions, given the large weights of sectors such as technology and health in benchmarks, ”he said.
By region, BlackRock is overweight in the United States due to its technology and health exposure, with US capitals geared toward a cyclical rebound. BlackRock has become neutral in terms of underweighting European stocks, as there is room to close the valuation gap as the economic restart increases.
The buzz
Powell brings his low-interest narrative to the House Financial Services Committee, while two key officials, Gov. Lael Brainard and Vice President Richard Clarida, are to deliver speeches. The US economic calendar also includes new home sales, while Germany recorded a stronger-than-expected increase in gross domestic product in the fourth quarter.
According to the Japanese newspaper Nikkei, President Joe Biden will sign an executive order to join Taiwan, Japan, South Korea and Australia to build semiconductor supply chains, electric vehicle batteries and rare earth metals. The Washington Post reported that Biden will sign the order on Wednesday.
Cathie Wood’s ARK Invest funds added $ 168 million Tesla TSLA,
shares on Tuesday, after the electric vehicle maker closed below $ 700, according to its website.
Payment service Square SQ,
fell 4% after announcing a new $ 170 million investment in bitcoin BTCUSD,
as it exceeded the fourth-quarter earnings estimate in slightly better-than-expected revenue.
PRA Health Sciences PRAH,
increased 25% in pre-market trade after accepting purchase by Icon ICLR,
in a $ 12 billion cash and stock deal
Bausch Health Companies BHC Shares,
rose Wednesday to a five-year high in the premarket trade, after the pharmaceutical and medical device company said it had reached an agreement with billionaire investor activist Carl Icahn and would add two of its nominees to its board of directors. .
GameStop GME,
the video game retailer, announced that its chief financial officer would resign. Forbes reported that the board lost confidence in Jim Bell’s ability to move to an e-commerce approach. In this regard, Robinhood co-executive Vlad Tenev defended the management of his company’s GameStop saga in an interview with Barstool Sports founder Dave Portnoy.
The markets
US stock futures ES00,
NQ00,
they leaned higher on Wednesday. On Tuesday, the S&P 500 SPX,
he finished higher after five consecutive defeats.
The performance of the TMUBMUSD10Y three years from the Treasury,
rose to 1.37%. Hong Kong values HSI,
fell after the government announced it was raising the stamp duty in stock trading.
Random readings
A Chinese court has assessed a woman’s domestic chores in a landmark divorce case on roughly what the country’s poorest earn.
According to a study, nocturnal owls perform less well in the first years of work.
According to a new study, it is possible to create an almost 100% accurate brain-computer interface for wheelchairs.
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