Last January, the US government’s long bonds were traded for 10 years in a return on a 4.8% redemption. Risk, and the stock market in their heads, to solid channels.
However, it is now a surprising turn, the prices of American bonds have fallen sharply from the beginning of the present week to a level of a return of about 4.4%. Thus, while stock indices behave as you can expect in the panic moments, and just fall, the US government bond market is behaving unlike the past on the basis of past crises.
If in the past, investors used to “escape” to the US government’s bonds and buy them in terms of “arrival at the beach,” as it was in the early stages of the current crisis, then on Tuesdays, surplus sales that led to an increase in their applause (an increase in the risk level).
Immediately after the lids were imposed, Wall Street metrics fell to 10% on Thursday-Friday last week. The investors then attacked, as they were doing in times of crisis, on the US bonds, which in response to their price and return on them (the risk of them) dropped up to 3.99% on Friday.
As mentioned, recent developments have led to a sharp rise in bond yields, which sends the economists to look for answers.
According to Guzlan, President Trump’s decision to exacerbate the steps with China and to put higher coverings on it, “changed something in this correlation, with fear of a Chinese response that will include the sale of American bonds. At the same time, it increased the pressure on the markets and liquidity needs of investors, which also began to seep into the government bond market. ”
Trump raised the quotas on Tuesday from China, which have already entered more than 100%, leading to a renewed wave of falls in the Wall Street stock indices (S&P 500 underwent sharp elevators to a decrease of 1.6%) and subsequently on the Asian exchanges. Overall, the US flagship index has completed a 12% decrease in the past week (through Tuesday), while the NASDAC dropped 13% at this time.
“The market is awake for the high deficit”
Ronan Menachem, an economist who markets chief markets in Mizrahi Tefahot Bank, estimates that the leap in the US government’s bond yields stems from a number of factors, including fear of inflation. “The world’s dollars in the world and the implications of the lids, together increase the expectations of an increase in inflation, as they are expressed in the index -linked bonds (TIPS) and the expectations of households and companies,” says Menachem.
“Inflation increases the bonds whose redemption yield is nominal and therefore harms their value. In addition, if the economic program’s economic implications will be manifested in the short term, the interest rate may decrease before, but only temporarily, until the activity is recovering. Then the download process will be arrested and more dependent on the renewal of inflation drop. This can explain why the redemption yields in the bond with medium-halved BC are more that cost, and the yields will become more steep. ”
Menachem also explains that technical interest has influenced the bond market this week – the US Treasury has come out with the tender (debt recruitment) since the president’s announcement of the tariffs, which was “$ 58 billion to 3 years, which, according to estimates, received a relatively limited demand. This in turn influenced the secondary market, where the government bonds were traded. ”
He emphasizes that the market “is aware of the high deficit in terms of Product in the US government budget, and needs additional proofs that the Doge policy (the US budgetary efficiency, MK) is strong enough to compensate for the tax reduction that the administration is planning. If not, it will make it difficult for the interest rate when the deficit is still high. ”
Other factors that may have been buried on US government bonds were according to the establishment of the verbal clashes between the president and American Governor Jerome Powell on the issue of interest. While Trump requires an immediate interest rate reduction, the Governor Repeates that the data on the impact of the quota program will be awaited, both for the price of price and economic activity. These entertaining clashes are problematic to the market, which prefers coordinated policy, and this may also be reflected in the rise in redemption, to evaluate comfort.
He said that large US bonds may have chosen to sell some of them. “In this regard, it should be remembered that China has a small share of US government bonds. Their possible sale will increase the market’s bonds.
And there is another scenario, more optimistic, offered by Wall Street Journal this week, stating that the bond yields jumped because the markets after the last week’s jerks are watching the “normal” in stock markets. Therefore, the level of yield in government bonds have returned to some extent of the current crisis in the markets.
Also the Tel Aviv bonds in descents
In Tel Aviv, trading opened on Wednesdays in the stock market in more than 1%, with the bond market as an direction and exhibits.
index Tel Gov-General Which includes the government’s bonds, recorded 0.3%(Wednesday at noon), which led him to summarize the past week with a 0.2%decrease, and the return to his redemption is estimated at 3.53%. In the past year, the Tel Aviv rose 3.6%, investors’ testimony in the local economy, at least until the current crisis.
The long bonding index for the Israeli government, Tel Gov-Zakley 10+, also fell 0.6%on Wednesday (still a weekly increase of 0.3%), with the return to redemption in which it increased to 4.67%.
Regarding the eras issued by companies, the key corporate bond indices were also traded on Wednesday when the Bond 60 was lost about half a percent.
Only a quarter of a billion shekels of corporate bonds (which are not part of the debt) were traded in a fourth double-digit return, a fare that indicates the resilience of most companies, in the eyes of investors. A year later, the stock exchange was already “empty” from them, and to the time that covered this condition was preserved.
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