miércoles, 10 de junio de 2015

miércoles, junio 10, 2015


MEMORIES OF 2013 ‘TAPER TANTRUM’

RETURN

By Jon Hilsenrath

Tuesday, June 9, 2015
 .
Bloomberg
 
Yields on 10-year U.S. Treasury notes have risen from below 2% in April to 2.37% of late, a movement that is sparking talk in investment circles of a repeat of the “taper tantrum” of 2013.

Back then, yields shot up, stock prices tumbled and emerging markets convulsed when Federal Reserve officials broached publicly the idea of ending the bond buying program known as quantitative easing. The market volatility had real economic consequences – slowing a fragile U.S. housing recovery. But this doesn’t quite feel like a repeat of that episode just yet.

Back in 2013, a fundamental problem was that the market misread the Fed’s plans for its bond purchases. Fed officials were eying an exit from the program at a time when some investors were talking about “QE-infinity,” the idea that bond buying might go on forever and ever. The market move was about investors getting their expectations in line with the central bank’s intentions.

The latest move appears driven by stronger economic data and not a fundamental reassessment of the Fed’s plans. Friday’s jobs report, which showed robust hiring in May, in addition to some good economic news on U.S. car sales and trade, have helped to wash away fears that the U.S. economy has lost momentum. This does affect market expectations for Fed policy; a Fed increase in short-term interest rates in September now looks more likely than it did a few weeks ago. But that shift in expectations is driven by economic data and not a misreading of the central bank’s game plan. That ought to make this move easier for investors and the economy to digest.

As pointed out in a research note by Krishna Guha, vice chairman of the research group Evercore ISI, this episode also hasn’t been accompanied by the sharp stock market declines that characterized the 2013 tantrum. It’s also worth repeating that 2.37% is still an awfully low yield for a 10-year Treasury note in an economy in which the central bank wants 2% inflation. Investors walk away with a measly real return, a sign of the economy’s longer-run torpor and the extent of cheap credit still in the financial system.

None of this is to say that investors have an easy ride ahead of them. A rise in yields on German bunds has been even sharper of late – climbing from near zero in late April to just under 1%. The move took place over a few days and reversed months of decline. With yields deeply suppressed – like a coiled spring — by the combination of weak economic fundamentals and aggressive central bank action, the risk of sudden and destabilizing reversals in the U.S. or elsewhere still runs high.

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