Oct 31 2018, 10:27 AM
QUOTE(cherroy @ Oct 31 2018, 09:50 AM)
Previously Fed interest rate was 0.25%, and treasuries was 1.xx%, which lead to stock market rally non-stop for almost 10 years.
Now Fed has increased the interest to 2%, and treasuries yield is 3.1%.
No such thing of "fair value", it depends on economy situation.
With tax cut and high deficit of US (tax cut somemore), the only way to finance the budget is through issuing more treasuries, more treasuries, more supply.
More supply, treasuries price down, yield up.
Somemore, with red hot US economy, Fed needs to increase rate further, if not the economy may too hot and run into trouble.
on top of that, China is under pressure to dump US treasuries to defend depreciating RMB that's close to 7 per USD. since weaker RMB tends to widen US trade deficit with China which is certainly not what Donald Trump desires, it's interesting to see what his next move will be. Now Fed has increased the interest to 2%, and treasuries yield is 3.1%.
No such thing of "fair value", it depends on economy situation.
With tax cut and high deficit of US (tax cut somemore), the only way to finance the budget is through issuing more treasuries, more treasuries, more supply.
More supply, treasuries price down, yield up.
Somemore, with red hot US economy, Fed needs to increase rate further, if not the economy may too hot and run into trouble.
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