Surge in Treasury Yields Highlights Easing Economic Worries

Surge in Treasury Yields Highlights Easing Economic Worries

Kruger, Daniel, and Matt Wirz. “Surge in Treasury Yields Highlights Easing Economic Worries.” The Wall Street Journal, Dow Jones & Company, September 13, 2019, https://www.wsj.com/articles/treasury-yields-rise-erasing-much-of-august-decline-11568391190.

The article reported that the U.S. government bond yields had posted a record weekly advance more than it had for six consecutive years. The rise followed the Commerce Department annunciation that retail prices had raised more than the expected 0.4% in August. The increase in the retail sales pushed yields on the benchmark 10-year Treasury note to a close of 1.901% up from the 1.789% on the Thursday of the same week.

Taplin, Nathaniel. “The Real Loser From the Oil Price Jump Is China.” The Wall Street Journal, Dow Jones & Company, September 16, 2019, https://www.wsj.com/articles/the-real-loser-from-the-oil-price-jump-is-china-11568634243.

Another recent economic issue involves the rise of oil prices and how they could affect the U.S. and China, the two forces in the world economy. The article analyzes the dynamics of oil changes and how they would affect both the U.S and the Chinese economy. In the article, China is presented as the biggest loser as it stands out as the biggest importer of crude oil. Crude oil is one of the most significant areas of conflict between the U.S. and China. As Brent crude rose to $58.44 per barrel, the U.S. West Texas Intermediate crude dropped by 4 cents to $52.59. Following these changes, an intervention by the government of Turkey aimed at stabilizing the crude oil prices in an effort to calm down the U.S.-China trade war. Turkey’s response was a military attack against the Kurdish fighters along the country’s border, a move described by President Tayyip Erdogan as an effort to eradicate a “terror corridor.”

Puzder, Andy. “Opinion | Labor Shortage May Imperil Growth.” The Wall Street Journal, Dow Jones & Company, September 17, 2019, https://www.wsj.com/articles/labor-shortage-may-imperil-growth-11568760707.

On September 17, Puzdar Andy published an article describing the quality of labor. The report indicated a severe problem in the labor sector as it exposed a severe shortage of skilled personnel. Based on the findings of the National Federation of Independent Businesses, a considerable percentage of medium and small business owners complained over the inability to find qualified workers in August 2019. Surprisingly, a staggering 57% of the respondents, inclusive of 89% of small business owners seeking to hire, found few or no qualified applicants. The article is arguably a wake-up call to the labor sector and global education systems.

Kiernan, Paul. “Mortgage Rates Decline Ahead of Fed Meeting.” The Wall Street Journal, Dow Jones & Company, September 18, 2019, https://www.wsj.com/articles/mortgage-rates-decline-ahead-of-fed-meeting-11568800800.

Following the Federal Reserve’s decision to cut interest rates in July, this article was published to analyze how the cut had influenced housing. The underlying research established that the move had stirred a wave of support on household spending and mortgage refinancing regardless of the enormous economic uncertainty. Barely two months after the Federal Reserve went through with the cut on interest rates, mortgage rates in the U.S. hit a record three year low. In just weeks, the average rate on a 30-year, fixed-rate mortgage for a usual borrower wielding a perfect credit and a 20% down payment fell to 3.56% in the week after the fed’s annunciation from 3.75% the week before.

Ip, Greg. “Oil Spikes, Auto Strikes Join List of Supply Shocks.” The Wall Street Journal, Dow Jones & Company, September 18, 2019, https://www.wsj.com/articles/oil-spikes-auto-strikes-join-list-of-supply-shocks-11568805115.

Arguably one of the articles that required the attention of economic analysts, this article discussed supply shocks concerning two events. First, an attack on Saudi oil production saw the price of crude oil rise astronomically. Secondly, the United Auto Workers went on strike for the first time in 12 years despite trials by General Motors Co. to stop them. Although the events would misguide any analyst who would discuss them in isolation, it is clear, placing them as the latest occurrences in a serious of supply shocks for the U.S. and other global economies.

Otani, Akane. “August’s Hot Recession Trade Is Cooling.” The Wall Street Journal, Dow Jones & Company, September 22, 2019, https://www.wsj.com/articles/augusts-hot-recession-trade-is-cooling-11569153601.

Akane Otani’s analysis of the stock market indicated that the hot recession trade was cooling down. On September 22, stocks were close to hitting a record, while Treasury yields were increasing drastically. Many investors explained that the changes point to an unraveling of fear-driven bets that sent markets tumbling in August. Since January 2018, the yield on the 10-year Treasury note that is widely tracked by investors as it is used as the baseline for setting rates of a variety of sectors such as mortgage and student loans hit the lowest at 1.754% from 1.469% at the beginning of September 2019.

“RBA Poised for Third Rate Cut as Global Easing Wave, Trade Risks Show No Signs of Abating.” Morningstar, Dow Jones, September 24, 2019, https://www.morningstar.com/news/dow-jones/201909243271/rba-poised-for-third-rate-cut-as-global-easing-wave-trade-risks-show-no-signs-of-abating.

On September 24, it was evident that the Australian government was on the verge of lowering its official interest rate. The Australian government caved from the pressure of other massive economies such as the U.S. going through dramatic reductions consecutively. The Reserve Bank of Australia had lowered its official interest rate twice in June and July. As of September 24, the price had hit 1.0%, which was a record low from 1.50% before the June and July reduction.

The economic impact of the decision is expected to be felt globally with other world economies expected to follow suit.

Fairless, Tom. “Central-Bank Hawks Raise Their Voices Against Low Rates.” The Wall Street Journal, Dow Jones & Company, September 26, 2019, https://www.wsj.com/articles/central-bank-hawks-raise-their-voices-against-low-rates-11569503551.

Following a series of reduced interest rates by governments of massive economies such as the U.S., Australia, and China, central banks began to oppose the move the week before September 26. Major central banks rose in disapproval as the vocally challenged the move, indicating that the monetary policy should be left unchanged. Major central banks expressed reservations indicating that raising rates was essential for guarding against excessive inflation. Others added that reducing interest rates would risk an investment bubble or create other adverse effects. Additionally, vocal critics in the banking sector contended that the move to lower interest rates not unnecessary for expanding domestic economies with low unemployment.

Kruger, Daniel. “U.S. Government Bond Yields Decline After Jobs Report .” The Wall Street Journal, Dow Jones & Company, October 4, 2019, https://www.wsj.com/articles/u-s-government-bond-yields-climb-after-jobs-report-11570196003.

Fast-forwards into October 4, the U.S. government bond yields registered a decline. The bond fell as data came out showing that the U.S. created fewer jobs in September than in August. On this date, the yield on the 10-year Treasury note, which is the benchmark of setting other rates, fell to 1.515% from 1.53.1% ion Thursday, October 3, 2019. This was the third consecutive week and stood only 0.1 above its low for the year. The fall was an important economic event as it shows a direct weakness in the economy that should be dealt with expeditiously. The U.S. government was on the look-out, as the fall forced the government to deduce ways that would improve the situation.

Iosebashvili, Ira. “Mixed Market Signals Pose a Conundrum for Investors.” The Wall Street Journal, Dow Jones & Company, October 6, 2019, https://www.wsj.com/articles/mixed-market-signals-pose-a-conundrum-for-investors-11570363200.

On October 6, 2019, investors in the U.S. were on alert as they found it hard to predict the outcome of any investment following mixed signals of economic indicators. While some felt that the recent contradictory economic indicators marked a begging of a 10-year economic expansion, others contended that they scored a prolonged slowdown. The confusion was fueled by data indicating a steep decline in the service and manufacturing sector.

The opposing team pointed out that the confusion weighted on the rise of short-term Treasury yields over the long term ones.

“Fed Minutes Show Worry About Effects of Trade War; U.S. Worker Demand Softens; Powell Transcript.” The Wall Street Journal, Dow Jones & Company, October 10, 2019, https://www.wsj.com/articles/fed-minutes-show-worry-about-effects-of-trade-war-u-s-worker-demand-softens-powell-transcript-11570712856?mod=searchresults&page=7&pos=6.

Another important direction in the economy of the U.S. came on October 10 when minutes Federal Reserve from September 2019 revealed that there were concerns amidst official that the trade war was likely to slow down U.S. economic growth. Following the unrest in the economy, the minutes further pointed that fed Chairman Jerome Powell was expected to face pressure from the Federal Reserve rate-setting committee against cutting interest rates. The event happened concomitantly with a pull-back in U.S job openings alongside other signals indicating the possibility of a labor-market slowdown.

Chaney, Sarah, and Paul Kiernan. “Global Slowdown Spreads Across U.S. Economy.” The Wall Street Journal, Dow Jones & Company, September 27, 2019, https://www.wsj.com/articles/u-s-consumer-spending-slowed-sharply-in-august-11569587637.

On September 23, Chaney, Sarah, and Paul Kiernan reported that Global trade tensions placed a weighty economic burden on significant world economies. An analysis showed that European output slowed while business activity in the U.S. rose only slightly. In the article, HIS Markit reported that its composite U.S. purchasing manager’s index for September was at 51 up from 50.7 in August. It is worthy to note that the reading is analyzed based on survey data from services and manufacturing businesses. This article was vital as it indicated a slight improvement and restoration of higher levels of manufacturing and service delivery as the index had hit its lowest point in three years. The HIS Markit index is an essential tool as it measures the level of production and industry where a reading above 50 is an indicator of growth in manufacturing activity.

Omeokwe, Amara, and Paul Hannon. “Trade War Subdues U.S. Business Activity, Weighs on Europe.” The Wall Street Journal, Dow Jones & Company, September 23, 2019, https://www.wsj.com/articles/germany-on-brink-of-recession-as-factories-slump-11569237721.

On September 23, Harriet Torry and Amara Omweokwe reported that consumer spending increases at a 4.6% annual rate in the second quarter. Although a critical measure of the U.S. corporate profits was revised lower, the article reported that U.S. economic growth was unrevised in the second quarter. Additionally, the article quoted information from the commerce department, which indicated that the gross domestic product (GDP), which measures the level of production of goods and delivery in the U S., rose at a 2.0% seasonally and inflation-adjusted annual rate April through June.

Mackerel, Kim. “Canada Added More Jobs Than Expected in September.” The Wall Street Journal, Dow Jones & Company, October 11, 2019, https://www.wsj.com/articles/canada-added-more-jobs-than-expected-in-september-11570799001?mod=searchresults&page=7&pos=3.

On October 11, Canada’s labor market a steady advance yet again in September, resulting in an unexpected fall to unemployment to 5.5%. The advancement was an essential economic event as it came at a time when most of the significant global economies were reporting a decline in jobs created. The Bank of Canada was, therefore, put its decision on interest rates on hold. Canada came out monumental as it stood out in contrast with other global economies that had cut their interest rate.

Borodovsky, Lev. “The Daily Shot: U.S. Firms Are Losing Market Share in China.” The Wall Street Journal, Dow Jones & Company, October 15, 2019, https://www.wsj.com/articles/the-daily-shot-u-s-firms-are-losing-market-share-in-china-01571125742?mod=searchresults&page=7&pos=1.

On October 15, the wall street journal published this article to evaluate the detrimental effects of the trade war. Many U.S companies have faced tough times since the Chinese government imposed hard tariffs on them. “China has become the largest market to sell into for many of America’s largest companies,” says Shaun Rein, managing director of the China Market Research Group, which advises U.S. companies doing business in China. Companies such as Boeing, Nike, Starbucks, among others, are yet to suffer more as the trade war is predicted to intensify.

“Fed Adds $99.9 Billion in Liquidity as Supply of T-Bills Outstrips Fed Buying; Australia’s Fiscal Face-Off.” The Wall Street Journal, Dow Jones & Company, October 23, 2019, https://www.wsj.com/articles/fed-adds-99-9-billion-in-liquidity-as-supply-of-t-bills-outstrips-fed-buying-australias-fiscal-face-off-11571835056?mod=searchresults&page=6&pos=3.

On October 23, The Federal Reserve added a staggering $99.9 billion in temporary liquidity to the financial system. The move calmed down recent fears posed by experts questioning the ability of the central bank to tame volatility in short-term lending markets. Outside the U.S, and on the same day, Australia’s Treasury Secretary defended the government policy and expenditure following an argument from the country’s top central banker calling for more government spending.

“A Model to Assess Bank Funding Risks.” The Wall Street Journal, Dow Jones & Company, December 27. 2016, https://www.wsj.com/articles/a-model-to-assess-bank-funding-risks-1482862792.

The transition of power from European Central Bank president Mario Draghi to his successor Christine Lagarde saw the world lead experts on economy rock horns with a varying proposal, arguments, and counter-arguments on the way forward. Before leaving, Mario Draghi made sure that he issued a warning, indicating that the eurozone’s economy was still vulnerable. On the same date, reliable data showed that continuous interest rate cuts by active central banks had not yet turned around smaller economies.

Timiraos, Nick. “Fed Cuts Rate for Third Time This Year, Signals Pause.” The Wall Street Journal, Dow Jones & Company, October 30, 2019, https://www.wsj.com/articles/fed-cuts-rates-by-quarter-point-11572458556.

On October 30 The federal reserve chairman Jerome Powell has reaffirmed the financial world that there would be no more cut on interest rate unless the economy slowed sharply. This came after the Federal Reserve had gone through with the reduction on the interest rate for three consecutive times in the year. He further added that the interest rate was appropriate and that there were no economic indicators that would warrant an increase or further cut.

Morath, Eric. “GM Strike Expected to Cloud Friday’s Jobs Report.” The Wall Street Journal, Dow Jones & Company, November 1, 2019, https://www.wsj.com/articles/gm-strike-expected-to-cloud-fridays-jobs-report-11572580861.

As early as November 1, experts were on alert, discussing the possible outcome of the pending Labor Department report. Economics expectations were that the Labor Department jobs report would show that employers added 75, 000 to payrolls during October. Additionally, the unemployment rate was expected to rise to 3.6% following the United Auto Workers strike against General Motor.