This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Global Macro: Yield Curve Takes a Breather

Stocks in this article: SHY TLT EEM VT IEF

NEW YORK ( TheStreet) -- Investors took profits on the U.S. dollar and reassessed their currency outlook on Thursday as minutes from the Federal Reserve's June meeting hinted at indecision over the initial start date for slowing bond purchases. Most economists still believe September will be the start of a slowdown, but the Fed made it clear that employment targets must be hit for that to be the case.

The first chart below is of iShares Barclays 1-3 Year Treasury Bond (SHY) over iShares Barclays 20+ Year Treasury Bond (TLT). This pair represents the Treasury yield curve. When the price rises, the curve steepens. A steeper yield curve is usually bullish for the economy and equity sectors such as bank stocks.

The pair pulled back yesterday and looks to be overbought with regards to both of its uptrend lines. A pullback in the curve could signal further dollar weakness and commodity market strength.

The next pair is of iShares MSCI Emerging Markets (EEM) over Vanguard Total World Stock Index ETF (VT).

A return of commodity market strength is bullish for emerging economies. Countries such as Brazil, China, and Russia are heavily tied to commodities, and most derive a big percentage of their revenue from such industries.

With a weakening dollar and stronger commodities, it looks as if the pair below could be hitting an intermediate bottom. Investor confidence returning to inflation-linked assets could drive funds into emerging-equity markets over the next few weeks.

The last chart is of SPDR Barclays High Yield Bond (JNK) over iShares Barclays 7-10 Year Treasury (IEF). High-yielding corporate debt has outperformed recently as the economic climate has improved and the steep rise in interest rates has slowed.

Due to interest rate and other risks, high-yielding debt tends to get hit the hardest when rates rise considerably. The pair did see volatile trading during the markets reassessment of quantitative easing from the Fed. Prices bottomed in early June and have since pushed to new highs alongside equities.

As the economy continues to improve and markets fully price in a rates increase, equity and high-yielding debt markets should continue higher.

At the time of publication the author had no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a senior at Georgetown University earning a degree in Economics.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs