All articles tagged with #real yields
Long-term U.S. Treasury yields jumped about 0.1 percentage point after Warsh’s Jackson Hole remarks, but inflation expectations have barely moved; the move is driven by higher real yields tied to growth, Fed policy expectations, and heavy government borrowing, with the 30-year yield pressing toward 5.27% and posing a fresh headwind for equities even as earnings stay strong.
Morgan Stanley sets a $5,200/oz gold target for late this year, driven by renewed ETF and central-bank buying, a weaker dollar and expected Fed rate cuts, but cautions that gold has shifted from a pure safe-haven to a real-yields trade, having fallen about 14.5% since the Iran conflict began.
The stock market is facing a "real" yield problem as investors become more focused on rising real yields, adjusted for inflation. The yield on 10-year TIPS (Treasury Inflation-Protected Securities) reached its highest level since March 2009, indicating market pricing of higher policy rates relative to inflation and a stronger economy. Economists are concerned about looming upside risks to inflation due to a strong labor market, rising wages, and continued consumer spending. Higher interest rates typically lead to lower stock prices, and investors are concerned about the impact on equities. The move in real yields suggests a longer-term shift away from low interest rates in the US economy.
Surging real yields are causing concerns about the buoyancy of the stock market, as experts worry about the potential impact on leverage and market stability.
Standard Chartered says gold's response to real yields is stronger than its response to safe-haven demand, and predicts that gold prices will remain elevated due to growing recession and inflation risks. The bank also sees another test of $2,000 an ounce as "increasingly likely." However, the risk for gold prices is a drop in the near term as investors face liquidity issues amid market volatility. The bank is projecting a 25-basis-point hike in the Federal Reserve's monetary policy meeting on Wednesday, followed by a potential pause in tightening.