The Bond Strategist
The Economy and Bonds by Forex Indicators
††††††††††† The global economic slowdown has been lingering around for the last three to four years, and could linger on for a few more. This as we all know has kept interest rates at record lows. With yields this low it is hard to find a place to put your money that will give you any type of return. Up until the month of May the equities market had been up over 50% from its March 2009 low. If you had happened to get in and stayed in you would have profited handsomely. Many investors though were still very cautious of the stock market because of the past few years, and chose to stay out. Instead many had just put their cash into short term paper accounts, Treasury Bills or Treasury Bonds. Some even found a safe haven in the fixed income of highly rated companies with strong businesses that have been around for years.
hasnít been a better time for business to raise money than in the past few
years. Rates have been so low that they continue to issue new debt to fund
further operations, or to pay off debt that they issued years earlier at a
high rate. The lower the borrowing rate a company has to pay the better
chance it has to make a profit. Right now the government is encouraging
growth with these low rates, and many are taking advantage of it. Even the
little guys on
rates cannot stay at this level forever, and since they cannot go any lower
the most logical move is for them to rise. The real question is when? The Federal Reserve has
continued to hint that the rates will remain low for the foreseeable future.
No one really knows what that really means, but until we see consistent job
growth they should remain low. If the economic indicators signal inflation
††††††††††† The fixed
income market will continue to stay stable through the end of the year.
However in 2011 look for the economic numbers to look good enough to warrant
rate hikes. Slowly the American worker will find work and that will lead to a
high consumer confidence number and more spending throughout the economy.
When this happens the