{"id":526788,"date":"2010-04-13T17:08:00","date_gmt":"2010-04-13T21:08:00","guid":{"rendered":"e2249889-c78b-43e3-9643-b1d7d4aa587b:422685"},"modified":"2010-04-13T17:08:00","modified_gmt":"2010-04-13T21:08:00","slug":"interpretations-of-a-rising-yield-curve","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/526788","title":{"rendered":"Interpretations of a rising yield curve"},"content":{"rendered":"<p>After the market\u2019s recent surge, everyone and her brother is keeping an eye on interest rates to divine what\u2019s going to happen next. But that\u2019s where the unanimity ends. It seems there are many ways to interpret a yield curve.<\/p>\n<p>John Lonski of Moody\u2019s Credit Trend Service points out that a rising stock market has usually been associated with a thinning of the spread between the interest rates on high-yield bonds and the interest rates on Treasuries. <\/p>\n<p>This makes sense: when people are eager to take on risk they buy either stocks or high-yield bonds. The former drives up stock prices; the latter drives down the rates on high-yield bonds. Given the continuing shrinkage of the high-yield bond spread, it appears that investors\u2019 appetite for risk is still strong. So Lonski concludes that stocks have more room to run.<\/p>\n<p>But not so fast. Barry Knapp at Barclays Capital argues that the Federal Reserve is close to a change in policy. Knapp expects two-year Treasury rates to shoot upward. \u201cIf the Treasury curve bear flattens as we expect, equities will witness a typical Fed policy normalization-related correction of approximately 8%,\u201d he says.<\/p>\n<p>The folks at the Trader\u2019s Narrative blog aren\u2019t convinced. They argue that rising rates aren\u2019t necessarily bad for the stock market: it all depends upon the speed with which the increases come. \u201cIf rates rise with a stealth bear market in bonds, that would be one thing. If they suddenly go haywire, the way we\u2019re seeing, for example, in Greece\u2026that woud be a very different thing.\u201d<\/p>\n<p><a href=\"http:\/\/www.tradersnarrative.com\/will-bond-market-vigilantes-trip-up-the-equity-market-3938.html?utm_source=feedburner&amp;amp;utm_medium=feed&amp;amp;utm_campaign=Feed%3A+TradersNarrative+%28Trader%27s+Narrative%29\" >Ned Davis Research<\/a><a href=\"http:\/\/www.tradersnarrative.com\/will-bond-market-vigilantes-trip-up-the-equity-market-3938.html?utm_source=feedburner&amp;amp;utm_medium=feed&amp;amp;utm_campaign=Feed%3A+TradersNarrative+%28Trader%27s+Narrative%29\" > <\/a>is willing to put hard numbers on its forecasts. It says that if the 10-year U.S. Treasury jumps from its current 3.8% to above 4.25%, stocks &nbsp;will shudder. If 10-year rates go above 5.25%, forget about this bull market.<\/p>\n<p><i><font size=\"4\"><font face=\"Verdana, Helvetica, Arial\"><span style=\"font-size:13px;\">Freelance business journalist <b>Ian McGugan<\/b> blogs for the Financial Post.<\/span><\/font><\/font><\/i><br \/>\n <br \/>\n<img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/network.nationalpost.com\/NP\/aggbug.aspx?PostID=422685\" width=\"1\" height=\"1\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>After the market\u2019s recent surge, everyone and her brother is keeping an eye on interest rates to divine what\u2019s going to happen next. But that\u2019s where the unanimity ends. It seems there are many ways to interpret a yield curve. John Lonski of Moody\u2019s Credit Trend Service points out that a rising stock market has [&hellip;]<\/p>\n","protected":false},"author":4060,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-526788","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/526788","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4060"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=526788"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/526788\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=526788"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=526788"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=526788"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}