Central bank dam burst may see dash from cash :Mike Dolan
Repeats column with no changes to text
By Mike Dolan
LONDON, Aug 2 (Reuters) -Catch the cresting wave?
After numerous bruising false starts, there's now a dash to lock onto what are still some of the highest government and corporate bond yields in 15 years before they evaporate as central bank easing finally gets underway in earnest.
Emboldened by headline inflation back at target and likely tax rises from the new British government, the Bank of England narrowly voted for its first interest rate cut in four years this week. That cut came within 24 hours of the U.S. Federal Reserve signaling it was ready to likewise cut rates in seven weeks time.
Although laced with "softly softly" rhetoric and caution about "data dependency", these two are merely catching up on the start already made by the central banks in the euro zone, Switzerland, Sweden and Canada.
And with real inflation-adjusted policy rates rising sharply to their tightest levels since the global banking crash of 2008, labor markets loosening and manufacturing growth stalling, there appears to be a consensus that now is the time to move to ensure they are not scrambling later on if the economic slowdown snowballs.
Short-dated government bonds are leading the charge.
Two-year U.S. Treasury yields US2YT=RR have clocked a cumulative 50-basis-point (bp) swoon in the space of a month to hit their lowest levels since February. Two-year UK gilt yields have shed as much in that time to plumb their lowest levels in more than year.
But it occurred across the curve - with 10-year Treasuries losing their 4% handle for the first time in six months. Europe rallied in sympathy, with even recently edgy French 10-year government yields falling back below 3% for the first time since a contentious snap election was called there in June.
And the widest sweep of global bond markets at large - the Bloomberg Multiverse index of government and corporate bonds - has seen implied yields plummet through 4% again to their lowest levels since early February.
LEAK OUT THE CURVE
There have been false dawns before of course.
The combination of creeping industrial slowdowns and better-behaved inflation, and wariness of many pricey equity markets, means still-brimming coffers of cautious cash may now start to leak out as short-term money market rates tumble.
The rush to secure a longer period of fixed returns in bonds while yields there are still historically high seems a likely first port of call.
And there's still a lot of money in cash.
According to ICI data, total assets in U.S. money market funds rose to the highest level on record this week at some $6.14 trillion - almost $1.6 trillion more than was there before the Fed started lifting rates in March 2022.
The question is whether it's now worth shifting to what are now much lower longer-term yields.
Anticipating a Fed move from its 5.38% policy mid-rate in September, three-month Treasury bill rates have slipped 10 bp over the month to 5.28% - but they remain 110 bp above fast disappearing two-year yield at 4.2%.
And yet futures markets already price a likely series of Fed cuts ahead that would bring policy rates below the current two-year Treasury by March of next year - and two-year notes themselves would almost certainly be far lower by then if that scenario unfolded.
All things equal, the current rates universe suggests a new two-year note bought today would yield more than a 3-month T-bill for 18 months of its maturity.
Analysts at TS Lombard earlier this year calculated that current two-year yields are still attractive even if you assume the 200 bp of Fed easing in this cycle now priced by futures markets "normalizes" the yield curve and returns a premium on two-year yields over Fed policy rates to a 50-year average of 30 bp.
And even if you think 200 bp sounds like a lot of easing, bear in mind that would still leave Fed policy rates at twice the 20-year average and almost 60 bp above what Fed policymakers see as long-term neutral - still 'restrictive' in the parlance of the U.S. central bank.
The upshot is that the temptation to move cash holdings further out the curve may now prove irresistible and bond markets seem to see that wave coming at last.
The opinions expressed here are those of the author, a columnist for Reuters.
Graphic-Britain joins the rate cut club https://reut.rs/3StBOak
Graphic-Bond yield wave cresting https://tmsnrt.rs/3SzNhVP
Graphic-Real Central Bank Rates Rising https://tmsnrt.rs/4d7ng8B
Graphic-US cash funds still brimming https://tmsnrt.rs/3WLlVOW
Graphic-Fed easing cycles and Treasury yields https://tmsnrt.rs/4dlA7Ex
by Mike Dolan X: @reutersMikeD: Editing by Paul Simao
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.
