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Are Bond Funds Hitting A Wall After A Solid February?
FYI: Fixed-income mutual funds continued their winning streak in February as yields fell even further from their already mild January levels. However, this tone has quickly reversed in March as President Trump's address to Congress on Feb. 28 and economic data pointed to the chances of the Federal Reserve raising rates sooner rather than later. Regards, Ted http://www.investors.com/etfs-and-funds/mutual-funds/are-bond-funds-hitting-a-wall-after-solid-february/
Watch for the upcoming Fed meeting on March 16-17. Probability for 25 basis point rate hike is over 50%. If employment continues to improve and inflation exceeds target rate of 2%, several more hike this year.
For my eyes/thoughts..........the most vital statement in the article:
"Internationally, Vail suggests avoiding G-10 foreign sovereign debt. Why? "Mainly because they're still firmly in easing mode, but yet rates are not going down," she said. "Combine that with dollar strength, which will probably chew at the domestic U.S. investor and eclipse any potential price return you're going to get from the easing policy at the ECB and the BOJ in those countries" (Europe and Japan.)"
>>>Japan's central more or less placed its QE program with the U.S.; after the 2008 market melt, and kept it in place longer. The European central bank played austerity for about 2 years after the market melt and continues today with purchases of some private bond issues for more support. Japan, within the past year intervened directed into their own equity markets for support of those markets. China? Your guess is better than mine. Higher interest rates here will indeed likely continue to maintain a stronger dollar (higher commodity pricing for other countries having to purchase a more costly dollar). And if there is another "twitch" in global equity markets, interest rates will come down here again as protection money will move to U.S. Treasury issues for safety. One big, funny money circle, eh? Just a IMHO 2 cents worth. Catch
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"Internationally, Vail suggests avoiding G-10 foreign sovereign debt. Why? "Mainly because they're still firmly in easing mode, but yet rates are not going down," she said. "Combine that with dollar strength, which will probably chew at the domestic U.S. investor and eclipse any potential price return you're going to get from the easing policy at the ECB and the BOJ in those countries" (Europe and Japan.)"
>>>Japan's central more or less placed its QE program with the U.S.; after the 2008 market melt, and kept it in place longer. The European central bank played austerity for about 2 years after the market melt and continues today with purchases of some private bond issues for more support. Japan, within the past year intervened directed into their own equity markets for support of those markets. China? Your guess is better than mine. Higher interest rates here will indeed likely continue to maintain a stronger dollar (higher commodity pricing for other countries having to purchase a more costly dollar). And if there is another "twitch" in global equity markets, interest rates will come down here again as protection money will move to U.S. Treasury issues for safety.
One big, funny money circle, eh?
Just a IMHO 2 cents worth.
Catch