Recently, rising yields on US bonds have become a big topic of conversation. In particular, the news that US 10-year bond yields temporarily exceeded 5% on October 23 brought great turmoil to the market. But what do US bonds actually look like? This time, I will briefly tell you the basics of US bonds.
What are US bonds
US bonds are bonds issued by the American government. This is a security that promises to be repaid to our investors with interest rates in the future when the government borrows funds. In general, it is unlikely that the US government's finances will go bankrupt, so it is regarded as a low-risk, safe asset, and has garnered the trust of investors around the world.
Relationship between yield and price
As yields on US bonds rise, the price of existing bonds falls. Because new bonds offer higher interest, existing bonds (lower interest) lose their appeal. Conversely, if yields fall, prices will rise.
In addition to having a high circulation volume, US bonds also have a strong influence on the market, and they are also a standard for deciding loan and deposit interest rates and corporate bond issuance conditions for banks within the United States. Interest rates are the momentum for investment by companies and investors, and the level of mortgages...
What are US bonds
US bonds are bonds issued by the American government. This is a security that promises to be repaid to our investors with interest rates in the future when the government borrows funds. In general, it is unlikely that the US government's finances will go bankrupt, so it is regarded as a low-risk, safe asset, and has garnered the trust of investors around the world.
Relationship between yield and price
As yields on US bonds rise, the price of existing bonds falls. Because new bonds offer higher interest, existing bonds (lower interest) lose their appeal. Conversely, if yields fall, prices will rise.
In addition to having a high circulation volume, US bonds also have a strong influence on the market, and they are also a standard for deciding loan and deposit interest rates and corporate bond issuance conditions for banks within the United States. Interest rates are the momentum for investment by companies and investors, and the level of mortgages...
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The Dow average rebounded for the first time in 4 weeks in the US stock market until 10/12, and both the S&P 500 and NASDAQ continued to grow. In the US stock market on the 11th, all 3 major indices continued to grow for 4 days. In response to heightened geopolitical risks surrounding the Palestinian conflict, US 10-year bond yields fell sharply to 4.62% at one point on the 10th. The decline in long-term US interest rates was well received, and major US tech companies led the rise in market prices, and public utility related stocks with high defensibility were also reviewed and bought, boosting the recovery trend in the US stock market. In the interest rate futures market, the Fed Vice Chairman's comments on the direction of monetary tightening “through an increase in bond yields instead of implementing additional interest rate increases” also improved market sentiment while many people were forecasting the FF rate unchanged at both the November meeting and the December meeting. In response to the fact that the rate of increase in US September CPI announced on the morning of the 12th exceeded market expectations, US 10-year bond yields began to rise. Both of the three major indices were pushed by profit-making sales, and fell for the first time in 5 days. The 11 major S&P 500 sectors are generally higher than last week. The public utility sector was at the top of price increases of 2.49%, and the real estate sector was 2.30%...
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Major US companies to confirm bottoming out in '23 3Q financial results
Weekend 13, $JPMorgan (JPM.US)$ 、 $Wells Fargo & Co (WFC.US)$ Starting with the 3Q earnings announcement, major S&P 500 companies will enter the 3Q earnings season. According to the factset summary (as of 10/6), it was shown that the predicted EPS for the S&P 500 type 23 3Q fell 0.3% from the same period last year, and that profit would decline for the fourth consecutive quarter. Looking at performance momentum, it is likely that the 2Q fiscal year 23 will be the bottom, with profit falling 5.4% in the 22/4th quarter, the same 3.4% decrease in profit in the 23rd quarter, and the same 7.1% decrease in profit in 2'23. Currently, upward revisions to EPS predictions have been made one after another, mainly by major US tech companies. Since the predicted EPS of the US IT sector has only increased by 4.6%, along with the announcement of profit increase financial results by major US tech companies, there is also a possibility that the 23-quarter results of major US S&P 500 companies will turn into a positive zone for the first time in 4 quarters. Incidentally, according to the EPS forecast for 23/4Q and onwards, profit increased 7.8% for 23-4Q, and 2.4% for the full year of '23...
Weekend 13, $JPMorgan (JPM.US)$ 、 $Wells Fargo & Co (WFC.US)$ Starting with the 3Q earnings announcement, major S&P 500 companies will enter the 3Q earnings season. According to the factset summary (as of 10/6), it was shown that the predicted EPS for the S&P 500 type 23 3Q fell 0.3% from the same period last year, and that profit would decline for the fourth consecutive quarter. Looking at performance momentum, it is likely that the 2Q fiscal year 23 will be the bottom, with profit falling 5.4% in the 22/4th quarter, the same 3.4% decrease in profit in the 23rd quarter, and the same 7.1% decrease in profit in 2'23. Currently, upward revisions to EPS predictions have been made one after another, mainly by major US tech companies. Since the predicted EPS of the US IT sector has only increased by 4.6%, along with the announcement of profit increase financial results by major US tech companies, there is also a possibility that the 23-quarter results of major US S&P 500 companies will turn into a positive zone for the first time in 4 quarters. Incidentally, according to the EPS forecast for 23/4Q and onwards, profit increased 7.8% for 23-4Q, and 2.4% for the full year of '23...
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Heightened geopolitical risks in the Middle East that blew away uncertainty about the Fed's monetary policy
With the outbreak of the Palestinian crisis on the 7th of the weekend, there is a high possibility that the uncertainty surrounding the Fed's monetary policy will be put to an end for the time being. Along with the US interest rate hike cycle that began in 2022/3, the Fed's monetary policy has always been accompanied by three uncertainties: 1. The presence or absence of further interest rate hikes (25 bp), 2. Whether there is a final interest rate hike declaration, and 3. When to cut interest rates, Mr. Powell has faced it with a stance that all of monetary policy is “dependent on data” and does not clearly answer any of them. Even at the Jackson Hole Conference held in August, Mr. Powell persevered through his ambiguous position. Three points were taken up, such as uncertainty about an appropriate interest rate level, uncertainty about the time lag in monetary policy effects, and uncertainty in the US labor market that could be inflationary pressure, etc., and Mr. Powell pointed out the three uncertainties in making monetary policy decisions. In preparation for the soft landing of the US economy, it was seen that Mr. Powell was struggling with dialogue with the market through references to various uncertainties, but he witnessed a heightened “geopolitical risk in the Middle East” due to the rekindling of the Palestine conflict, and...
With the outbreak of the Palestinian crisis on the 7th of the weekend, there is a high possibility that the uncertainty surrounding the Fed's monetary policy will be put to an end for the time being. Along with the US interest rate hike cycle that began in 2022/3, the Fed's monetary policy has always been accompanied by three uncertainties: 1. The presence or absence of further interest rate hikes (25 bp), 2. Whether there is a final interest rate hike declaration, and 3. When to cut interest rates, Mr. Powell has faced it with a stance that all of monetary policy is “dependent on data” and does not clearly answer any of them. Even at the Jackson Hole Conference held in August, Mr. Powell persevered through his ambiguous position. Three points were taken up, such as uncertainty about an appropriate interest rate level, uncertainty about the time lag in monetary policy effects, and uncertainty in the US labor market that could be inflationary pressure, etc., and Mr. Powell pointed out the three uncertainties in making monetary policy decisions. In preparation for the soft landing of the US economy, it was seen that Mr. Powell was struggling with dialogue with the market through references to various uncertainties, but he witnessed a heightened “geopolitical risk in the Middle East” due to the rekindling of the Palestine conflict, and...
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The Dow average continued to fall for 3 weeks in the US stock market until 10/5, and the S&P 500 continued to fall for 5 weeks. The NASDAQ continued to grow slightly while remaining flat. Assuming that the number of job offers for the US August (JOLTS US Employment Dynamics Survey) announced on the 3rd was 9.61 million, which greatly exceeded market expectations (8.8 million cases), and a tightening of US labor supply and demand was shown, observations of prolonged financial tightening by the Fed intensified. The 10-year US bond yield hit a high level of 4.81% every day for the first time in about 16 years, and the Dow average showed a decline of over 500 dollars at one point, and continued to fall drastically for 3 days. The US IT sector, which has a high PER, was sold, and the NASDAQ fell for the first time in 5 business days. Market sentiment also worsened due to a succession of hawkish statements by US Fed members, such as support for additional interest rate hikes at the November meeting and maintaining high level FF rates for a long period of time. The number of US ADP employed people in September, which was announced on the 4th, fell far short of market expectations, and the ISM non-manufacturing business confidence index in September showed a deceleration, so buyback was entered into US bonds, the rise in long-term US interest rates came to a standstill, and the three major indices all rebounded. Ahead of the announcement of US employment statistics for September on the 6th, the 3 major US indices fell slightly on the 5th, but were almost different from the day before...
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The August US Employment Dynamics Survey that triggered the rapid increase in long-term US interest rates
In the US bond market on 10/3, 10-year bond yields and 30-year bond yields all skyrocketed (bond prices fell). The 10-year bond yield, which is an indicator of long-term US interest rates, temporarily reached 4.806%, and the 30-year bond yield temporarily reached 4.950%, both of which set a high level for the first time in 16 years since 2007. The reason for the rapid increase in long-term interest rates in the US was an unexpected rapid increase in the number of US JOLTS (Employment Dynamics Survey) jobs for August announced on 10/3. The number of JOLTS jobs in August was 9.61 million, an increase of 690,000 cases compared to the 8.8 million cases predicted by the market, showing a high increase for the first time in about 2 years. The number of job offers in July was revised upward from 8.827 million to 8.92 million. Assuming that the tight US employment situation was shown, it seems that caution against additional interest rate hikes by the Fed led to a rapid increase in long-term interest rates at the November meeting. In response to the August JOLTS announcement, in the FF interest rate futures market, while the probability of leaving interest rates unchanged fell from 72.8% to 67.8% at the November meeting, the probability of a 25 bp interest rate hike rose from 27.2% to 32.4%.
What is the feeling that supply and demand in US labor are tight...
In the US bond market on 10/3, 10-year bond yields and 30-year bond yields all skyrocketed (bond prices fell). The 10-year bond yield, which is an indicator of long-term US interest rates, temporarily reached 4.806%, and the 30-year bond yield temporarily reached 4.950%, both of which set a high level for the first time in 16 years since 2007. The reason for the rapid increase in long-term interest rates in the US was an unexpected rapid increase in the number of US JOLTS (Employment Dynamics Survey) jobs for August announced on 10/3. The number of JOLTS jobs in August was 9.61 million, an increase of 690,000 cases compared to the 8.8 million cases predicted by the market, showing a high increase for the first time in about 2 years. The number of job offers in July was revised upward from 8.827 million to 8.92 million. Assuming that the tight US employment situation was shown, it seems that caution against additional interest rate hikes by the Fed led to a rapid increase in long-term interest rates at the November meeting. In response to the August JOLTS announcement, in the FF interest rate futures market, while the probability of leaving interest rates unchanged fell from 72.8% to 67.8% at the November meeting, the probability of a 25 bp interest rate hike rose from 27.2% to 32.4%.
What is the feeling that supply and demand in US labor are tight...
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This week's main flow (US 9/22 to 9/28)
The Dow average continued to fall compared to last weekend in the US stock market until 9/28, and both the S&P 500 and NASDAQ continued to fall for 4 weeks. On the 25th of the week, while all 3 major indices turned to a backlash for the first time in 5 business days, in response to comments from the rating company Moody's that the closure of US federal agencies would resonate with US credit ratings, the increase was limited in all 3 indices. On the 26th, US long-term interest rates temporarily set a high level of 4.56% for the first time in about 16 years, and the fact that the dollar index hit a high since the end of November last year became weighty, and the three major indices all fell, and the decline in the Dow average temporarily exceeded 430 dollars. $Apple (AAPL.US)$High-tech stocks such as high PER were sold. While long-term US interest rates remained high, NY crude oil futures began to fall for the first time in 3 days on the 28th. Buybacks of high-tech related stocks, economy-sensitive stocks, etc. came in due to a sense of affordability, and the Dow average on the 28th turned positive for the first time in 3 days, and both the S&P 500 and NASDAQ continued to grow. The 11 major S&P 500 sectors were a mix of buying and selling. The resource sector is at the top of price increases of 3.31% compared to last weekend...
The Dow average continued to fall compared to last weekend in the US stock market until 9/28, and both the S&P 500 and NASDAQ continued to fall for 4 weeks. On the 25th of the week, while all 3 major indices turned to a backlash for the first time in 5 business days, in response to comments from the rating company Moody's that the closure of US federal agencies would resonate with US credit ratings, the increase was limited in all 3 indices. On the 26th, US long-term interest rates temporarily set a high level of 4.56% for the first time in about 16 years, and the fact that the dollar index hit a high since the end of November last year became weighty, and the three major indices all fell, and the decline in the Dow average temporarily exceeded 430 dollars. $Apple (AAPL.US)$High-tech stocks such as high PER were sold. While long-term US interest rates remained high, NY crude oil futures began to fall for the first time in 3 days on the 28th. Buybacks of high-tech related stocks, economy-sensitive stocks, etc. came in due to a sense of affordability, and the Dow average on the 28th turned positive for the first time in 3 days, and both the S&P 500 and NASDAQ continued to grow. The 11 major S&P 500 sectors were a mix of buying and selling. The resource sector is at the top of price increases of 3.31% compared to last weekend...
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The rise in long-term US interest rates putting pressure on the US stock market
The 10-year government bond yield was temporarily in the 4.54% range in the US bond market on the 25th, reaching a high level for the first time in about 16 years since 2007/10. In addition to prolonged monetary tightening observations by the Fed in the background, the rapid expansion of US government debt since the COVID-19 pandemic has also stirred up market anxiety due to the expansion of the US budget deficit. According to the US Treasury Department, US government debt has broken through 33 trillion dollars and hit a record high. Based on the fact that the US debt at the end of 2019 was 23 trillion dollars, it is calculated that 10 trillion dollars have accumulated over 3 and a half years since the COVID-19 pandemic. The upward trend in long-term US interest rates over several months became heavy, and it began to decline in August $S&P 500 Index (.SPX.US)$ It has fallen by about 7% until the 27th of this month. It is estimated that it will be negative for the first time in a year on a quarterly basis (July-September).
Multiple sources of anxiety attack at the same time
Not limited to prolonged observations of interest rate hikes by the Federal Reserve, issues of concern such as the fact that the American Auto Workers Union (UAW) went on strike simultaneously for the first time in history at the 3 states and 3 bases of “Detroit 3,” concerns about the closure of US federal government agencies, and the resumption of student loan payments are the same...
The 10-year government bond yield was temporarily in the 4.54% range in the US bond market on the 25th, reaching a high level for the first time in about 16 years since 2007/10. In addition to prolonged monetary tightening observations by the Fed in the background, the rapid expansion of US government debt since the COVID-19 pandemic has also stirred up market anxiety due to the expansion of the US budget deficit. According to the US Treasury Department, US government debt has broken through 33 trillion dollars and hit a record high. Based on the fact that the US debt at the end of 2019 was 23 trillion dollars, it is calculated that 10 trillion dollars have accumulated over 3 and a half years since the COVID-19 pandemic. The upward trend in long-term US interest rates over several months became heavy, and it began to decline in August $S&P 500 Index (.SPX.US)$ It has fallen by about 7% until the 27th of this month. It is estimated that it will be negative for the first time in a year on a quarterly basis (July-September).
Multiple sources of anxiety attack at the same time
Not limited to prolonged observations of interest rate hikes by the Federal Reserve, issues of concern such as the fact that the American Auto Workers Union (UAW) went on strike simultaneously for the first time in history at the 3 states and 3 bases of “Detroit 3,” concerns about the closure of US federal government agencies, and the resumption of student loan payments are the same...
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There is little sense of surprise at the new iPhone presentation
“It's the best and most capable iPhone!” On the 12th of this month, at the presentation of the new smartphone “iPhone 15” $Apple (AAPL.US)$ CEO Cook discussed the workmanship of the company's latest models and uttered the opening words. In addition to the adoption of a new high magnification optical zoom camera, the charging board was completely transferred to a “USB-C terminal,” and all new functions remained within the range predicted in advance, such as using titanium to aim to reduce the weight of the exterior. While prices remained unchanged, with 15 being 799 dollars, Plus being 899 dollars, and Pro 999 dollars, Pro Max was raised from a minimum capacity of 128 gigabytes (GB) to 256 GB, and the price was also raised by 100 dollars to 1,199 dollars. The company has been pursuing a strategy that appeals for higher added value than the number of units sold. According to a survey by the US research company IDC, the average sales price of the company's smartphones in 2022 was 996 dollars, which is 30% higher than in '17. There was little sense of surprise at the presentation of the new iPhone, which predicts the US year-end sales season, and the company's stock price turned slightly lower than the previous day.
The global smartphone market is saturated
IDC...
“It's the best and most capable iPhone!” On the 12th of this month, at the presentation of the new smartphone “iPhone 15” $Apple (AAPL.US)$ CEO Cook discussed the workmanship of the company's latest models and uttered the opening words. In addition to the adoption of a new high magnification optical zoom camera, the charging board was completely transferred to a “USB-C terminal,” and all new functions remained within the range predicted in advance, such as using titanium to aim to reduce the weight of the exterior. While prices remained unchanged, with 15 being 799 dollars, Plus being 899 dollars, and Pro 999 dollars, Pro Max was raised from a minimum capacity of 128 gigabytes (GB) to 256 GB, and the price was also raised by 100 dollars to 1,199 dollars. The company has been pursuing a strategy that appeals for higher added value than the number of units sold. According to a survey by the US research company IDC, the average sales price of the company's smartphones in 2022 was 996 dollars, which is 30% higher than in '17. There was little sense of surprise at the presentation of the new iPhone, which predicts the US year-end sales season, and the company's stock price turned slightly lower than the previous day.
The global smartphone market is saturated
IDC...
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It showed a price increase of about 20% from the beginning of the year to the end of July. $S&P 500 Index (.SPX.US)$The index has turned to a correction tone in August. As of September 22, it has dropped by about 10% from its 52-week high. At the US September meeting held last week, as expected by most analysts, the US policy interest rate has been kept at 5.25-5.50%. On the other hand, looking at the "dot chart" that FOMC members consider to be the appropriate policy interest rate level, the policy interest rate forecast (median) as of the end of 2024 has been raised by 0.5% to 5.1% from the previous June announcement. The hawkish stance of FOMC members, who keep the US policy interest rate in the 5% range for over a year, has greatly dampened market sentiment, causing both the S&P500 index and the technology stocks-focused Nasdaq Composite Index to decline for 3 consecutive weeks.
Against the backdrop of Jerome Powell's strict monetary tightening stance casting a shadow over the US stock market, the topic titled "S&P500 index expected to rise by 19% over the next 12 months" (9/22) by FactSet is quite intriguing. According to the topic, market analysts forecast that the S&P500 index over the next 12 months...
Against the backdrop of Jerome Powell's strict monetary tightening stance casting a shadow over the US stock market, the topic titled "S&P500 index expected to rise by 19% over the next 12 months" (9/22) by FactSet is quite intriguing. According to the topic, market analysts forecast that the S&P500 index over the next 12 months...
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