rightcoastconservative

Just when the whole world coming for a rout, only US treasury yields shoot up to multi-months high. Investors might wondering why this happen. Some of our readers are posting these kind of question to us. We think this article might helps. US Treasury = US Government Bond Actually, we are referring to US Government 10 Years Bond. Generally, a government bond is issued by a national government (in this case US) and is denominated in the country's own currency (USD). Bonds issued by national government in foreign currencies are normally referred to as sovereign bonds. The yield required by investors to loan funds to governments reflects inflation expectations and the likelihood that the debt will be repaid. Also, government bonds were usually referred to as risk-free bonds , because governments could easily devalue their currencies or raise taxes to redeem the bond at maturity.  The Story of US Treasury Yields... Just like Base-Lending-Rate (BLR) for Malaysia, everything from mortgag...

When market sentiment was bearish, equities market would slump, just like what we seen for past few days. Global markets suffered yet another blow due to the uncertainties surrounding EU, where Greece may potentially exit European Union. Would Greece finally exit EU? This is an interesting yet important questions for investors. The headlines have been on the EU crisis recently, overshadowing the highly speculated Malaysia general election's date. Well, now would be a tough time for our Prime Minister to call on an election amid the gloomy global outlook. Maybe, the best time to hold an election already gone!!! Anyway, another interesting issue was the slump in Gold prices. Curiously, many investors questioning the different trend for gold prices. Normally, it will spike up along with the risk level of global equities market, together with USD. Theoretically, gold and USD would over-perform other asset classes during bad times. Yes, USD had already appreciated against a basket of c...

During market uncertainties, there are two popular safe assets which is Gold and USD . This explain why the demand for these two assets is great, resulting them to become more valuable while equity market fell. We experienced the said scenario recently and let's see the chart below to gauge the Gold price movements. "Gold prices collapsed from their August highs in September amid a broad commodity sell-off and despite intensifying concerns over sovereign debt issues in Europe. After exhibiting a remarkable correlation to real rates this year, particularly during the swift August rally, the sharp pullback in gold prices occurred with real rates mostly unchanged." "Gold prices have now fallen back in line with our 3-month price target. As we expect gold prices will continue to be driven in large measure by the evolution of US real interest rates and with our US economic outlook pointing for continued low levels of US real rates in 2012, we continue to recommend long t...

To answer that million dollar question, please let us examine the whole situation. First, what actually caused the market to slump? Second, the correction is short or long-term? In the end, it depends on how gut are you as an investor in this sentiment driven market. What actually caused the market to slump? Panic selling is my answer. Simple and straight to the point. Investors are so scared that they can't figure out what is going to happen after S&P downgraded US long-time AAA rating. This was the first time US was being downgraded. No previous record for investors to forecasts, so dump first la. Herd mentality is playing a very crucial role now (again). Short or Long-term correction? As mentioned, panic selling also means short-term correction . People are throwing their assets at a discounted price for the sake of getting their sleepless night away. After awhile, then only they realized that the actual situation is not as bad as they think. Then, investors will come back ...

The news that S&P downgrading US credit rating shows that rating agencies are doing their job fairly. Previously, rating agencies were blamed by Greece and Europe countries for downgrading their ratings when Greece facing rising debt issue. Though, US did not spare this round when S&P downgrade US AAA rating to AA+ (one notch lower). What would be the implications? Normally, the downgraded currency will slump, sovereign bonds will become less attractive by carrying higher degree of risk, hence pushing up the yields. Does US follow these theory? NO. Why US is different? USD will not fall much like Euro. First, USD is one of the safest asset, along with gold, during economic uncertainties. That's why USD was chosen as the world's most widely traded currency. During uncertainties (like now), investors are scare and they pull-out from equities around the world. But, where did they put the cash? USD is the answer mainly because it is widely used globally and of high liqu...