Falling US T-Notes: A Major Macroeconomic Indicator

2016年11月25日

The Bond Market. It is often overlooked by traders despite its instrumental role in the Global economy and determination of large macroeconomic trends. Major technical damage has been done across the board in the bond markets recently and this can be directly attributed to the new President of the United States. Donald Trump plans to explode an already enormous budget deficit. He plans to finance the proposed increases in government spending with low yield 30 Year fixed rate US Government Bonds rather than shorter term Treasury bills. The market is already starting to anticipate this influx of supply. The prices of US Bonds are falling and the yields are rising as a result. At this time the Federal Reserve must hike interest rates to preserve their credibility. Additionally, the US Dollar is currently appreciating relative to all other foreign currencies which erodes the purchasing power of foreigners and discourages the purchase of US Dollar denominated Bonds. Falling demand will contribute to the prices of these bonds declining much further. Unless yields rise significantly faster than inflation rises, which is extremely unlikely, the value of these bonds will continue to decline for the foreseeable future.

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