Global Macro: U.S. Yield Curve Still Rising
NEW YORK ( TheStreet) -- While global macro events are now driving day-to-day trading, one cannot forget about long-term trends affecting the market's overall direction.
Consider U.S. credit markets. Prices are said to discount all available information, which will be a useful assumption for today's analysis.
As investors sell off long-dated bonds, the yields move higher. If the rates in long-dated bonds move up faster than the increase in short-dated bond rates, then the yield curve steepens.Since May, when Federal Reserve Chairman Ben Bernanke began to discuss slowing down the Fed's bond purchases, the yield curve has been in a strong uptrend, even though public perception over the official start date to tapering has been volatile. The market has discounted all relevant information and continued to deem a rise in rates as the appropriate path. This chart pattern should be a good predictor that the Fed will stick to the expected September start date for tapering. The next chart is of iShares iBoxx $ Invest Grade Corp Bond (LQD). High-grade corporate bonds carry a similar pricing structure to Treasuries; however, they also factor in the additional credit, or default risk. Follow @AndrewSachais This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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