Tag Archives: yield curve

Jul 20, 2020

Impact of Inflation Expectations on Retirement Income

Our latest S&P STRIDE dashboard showed a dramatic increase in the cost of retirement income for various retirement dates (vintages) in Q2.  For example, the present value of an inflation-adjusted stream of cash flows equal to USD 1 per year – or USD 1/12 per month – starting in 2065 and ending 25 years later,…

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Mar 20, 2020

29 Days Later

On February 19th, the S&P 500® closed at an all-time high of 3386; last night, exactly one month later it closed at 2409, a 29% decline from the high.  Let’s take a moment to reflect on what’s happened over the last month. We should first start by putting the decline into historical context. The peak-to-trough…

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Jul 31, 2019

Channeling Maverick and the Maestro: The Fed Cut Rates because “We Were Inverted”

One of the classic scenes from the original Top Gun movie recounts the exchange Maverick (Tom Cruise) had with a MiG-28. Maverick corrects Charlie’s (Kelly McGillis) intelligence report on the Russian fighter jet with his eyewitness account. When she asks how he saw a MiG-28 perform a 4G dive from above, he responds: “Because I…

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May 30, 2019

Mayday, Mayday!

Coming into month-end, and as the street prepares its monthly summaries, (all figures are as of May 29th), the S&P 500 looks set to complete the month with a loss of around 5%.  So, what went wrong?  Global markets started the year very positively: the S&P 500 was up 18% by the end of April,…

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Jul 17, 2018

Yield Curve Anxiety

The slope of the yield curve is a good recession predictor. When the curve is inverted – when the yield on three month T-bills is greater than the yield on the ten year T-Note – a recession is imminent. Similar signals can be seen if the T-bill is replaced by a two- or three-year T-Note…

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Jun 29, 2017

60% of Japanese Sovereign Bonds Are Experiencing Negative Yields

In our last piece, we discussed the Bank of Japan’s (BoJ) monetary policy and how the yields of Japanese sovereign bonds have responded since 2016. The latest BoJ minutes released on June 26, 2017, reiterated that it “should continue with the current monetary policy,” while it also stated that it is “necessary to reduce the…

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May 5, 2017

Monetary Cycles and the Fixed Income Market – How Does the Slope Affect Returns?

In an earlier blog post, we provided a brief survey of recent monetary policy cycles in the U.S., showing that a higher Fed funds rate doesn’t necessarily affect the yield on Treasury bonds in the same way.  Policy rate changes affects short-term bond yields much more directly than longer-term yields (see Exhibit 1).  We argued…

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Jun 14, 2016

15% of Global GDP is in Negative Yielding Bonds

As of June 10, 2016, there is USD 10.6 trillion in negative yielding assets throughout the world—that’s more than 15% of global GDP. The increase in assets with sub-zero yields is evident when looking at the S&P Global Developed Sovereign Bond Index. On a market value basis, sovereign bonds with negative yields now account for…

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