Vine Investing
  • Home
  • Home
Search by typing & pressing enter

YOUR CART

2/21/2018 0 Comments

Bonds and the Dollar

The dollar has had a small rebound off its 3 year low and many are wondering if this is a good sign to buy into the greenback strength. Many of the indicators point to a higher Dollar, stronger economic growth, Higher interest rates in the US, and (so far) low inflation. Looking at a one month chart of the dollar index to the price of the 10 year treasury, you can see that the movement of the dollar to other currencies was in high correlation to the price of US bonds. Because yields move inverse to bonds, it could be assumed that lower bond prices (and higher yields) make the dollar become an attractive place to put money relative to other currencies. This trend should be watched to see if investors are using this as a short term trading catalyst or if the introduction of equity risk increased the relationship between bonds and the dollar.
Picture
Looking over a longer term trend there is a story to be told. The movements between the dollar and the yields in the past have been in sync (as you can see by the opposite movements in the chart) until the last 6 months where yields have dropped and the dollar followed suit. The cause of this could be a combination of many things, such as inflation expectations getting revised higher, or the political gridlock we have seen over the tax cuts and budget bill. It is certainly an adjustment to the expectations of that yields will not be lower for longer like we have seen in the past. Where is the 'proper' level to bring yields back to an attractive level that investors are bullish on holding dollar debt? Shorter term the answer looks like now, longer term we have to watch, inflation, the fed, and politics to determine what will make the US debt market investable again for large foreign buyers.
Picture
0 Comments



Leave a Reply.

    Archives

    June 2020
    April 2020
    March 2020
    December 2019
    November 2019
    October 2019
    September 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    July 2017
    June 2017
    May 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    April 2014
    March 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    July 2012
    June 2012
    May 2012
    April 2012
    March 2012
    February 2012
    January 2012
    December 2011
    November 2011
    October 2011
    September 2011
    August 2011
    July 2011
    June 2011
    May 2011
    April 2011
    March 2011
    February 2011
    January 2011
    November 2010
    October 2010
    September 2010
    August 2010
    July 2010
    June 2010
    May 2010
    April 2010
    March 2010
    February 2010

    Categories

    All Chinese Debt Commodities European Disunity Inflation Policy US Earnings

    RSS Feed