Tumbling US bond yields go against the assumption of a US economy growing more quickly and a Federal Reserve cutting back on its demand for government...

John Robertson

PortfolioDirect

Tumbling US bond yields go against the assumption of a US economy growing more quickly and a Federal Reserve cutting back on its demand for government securities. The chart shows monthly changes in the value of securities being purchased by the Federal Reserve (the blue line) and the yield on 10 year constant maturity government bonds (the red line). The dashed line represents the assumed slowdown in securities purchases over the balance of 2014. The chart suggests higher yields are associated with higher Fed demand for securities. Financial markets could be inferring that in the absence of the Fed growth is going to slow. Rising purchases may also imply stronger inflation ahead prompting the need for higher nominal yields. Now, the bond market appears to be saying that inflation worries are diminishing and the US economy is not yet on a sustainable growth path.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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