Treasury prices rose Monday, pushing yields lower, as protests in Hong Kong underlined geopolitical worries that have weighed on risk assets.
How are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -5.68% tumbled 9.1 basis points to 1.640%, its lowest level since October 2016, while the two-year note yield TMUBMUSD02Y, -2.98% was down 5.1 basis points to 1.578%. The 30-year bond yield TMUBMUSD30Y, -5.61% retreated 11.1 basis points to 2.130%, its lowest level since July 2016. The longer-dated maturity remains only three basis points away from its all-time low.
Debt prices move in the opposite direction of yields.
What’s driving Treasurys?
Demand for safe assets like Treasurys continued to pull global government bond yields lower as investors juggled simmering trade tensions between the U.S. and China, U.K.’s grind toward a no-deal Brexit, and the steady drip of anemic global economic data. The worsening growth backdrop has, in turn, raised expectations that the Federal Reserve will cut rates again in September, following a quarter-point cut in July.
Thousands of protesters rushed into Hong Kong International Airport on Monday, prompting the airport authority to cancel all outbound flights. The protests added to the litany of factors that have bruised investor confidence in recent weeks.
U.S. stocks logged their second straight decline as the Dow Jones Industrial Average DJIA, -1.48% recorded a 1.5% loss. Asian equities, however, showed a more mixed picture. Hong Kong’s Hang Seng Index HSI, -0.44% ended lower even as China’s Shanghai Composite SHCOMP, +1.45% posted gains.
What did market participants say?
“There’s no real evidence out against bonds right now,” said Kathryn Kaminski, a portfolio manager at AlphaSimplex, in an interview with MarketWatch. “There’s been a huge flight to safety across many asset classes since last week,” she said.
“You might as well thrown out the fundamentals for the time being, because as long as the globe is this unsettled, money will likely continue to pour into dollar-denominated assets like Treasuries. It almost doesn’t matter whether the data is strong or weak, that earnings continue to surprise to the upside, or that things are probably better than they seem,” wrote Kevin Giddis, head of fixed income at Raymond James.
The next recession will likely begin in 2020, according to the result of a recent panel of more than 100 real-estate economists polled by real-estate site ZillowZ, +0.43%. Half of those surveyed said the next recession will start in 2020, with nearly one in five identifying the third quarter as the likely beginning. Another 35% of experts think the current expansion will end in 2021.
The U.S. housing market is already heading into a potential correction.—Skylar Olsen, Zillow’s director of economic research
“Housing slowdowns have been a major component, if not catalyst, for economic recessions in the past, but that won’t be the case the next time around, primarily because housing will have worked out its kinks ahead of time,” Skylar Olsen, Zillow’s director of economic research, said.
“Housing markets across the country are already heading into a potential correction a solid year before the overall economy is expected to experience the same,” he added. “The current housing slowdown is in some ways a return to balance that will help increase the resiliency of the housing market when the next recession does arrive.”
Read MarketWatch’s Moneyist advice column on the etiquette and ethics of your financial affairs and, this week: ‘My children’s stepmother won’t return family heirlooms and gifts they gave their late father — how can we get them back?’
Morgan Stanley’s MS, -2.75% chief U.S. economist, Ellen Zentner, recently said there’s a 20% chance of recession in the year ahead. “For now, the path to the bear case of a U.S. recession is still narrow, but not unrealistic,” she said. And that was before the latest drop in the Dow Jones Industrial Index DJIA, -1.48% and S&P 500 SPX, -1.22% as U.S.-China trade fight intensifies.
However, Zentner added, “If trade tensions escalate further, our economists see the direct impact of tariffs interacting with the indirect effects of tighter financial conditions and other spill-overs, potentially leading consumers to retrench.”
The escalation in trade and tariff tensions appears to have shaken consumers’ confidence.
Some Americans have already been feeling uneasy. The escalation in trade and tariff tensions appears to have shaken consumers’ confidence in recent months. Consumer confidence fell to a two-year low in June of 124.3 before rebounding to 135.7, the highest level since November, according to the Conference Board. The latest stock-market drop, if prolonged, could flatten that bounce.
Many people are living with wildly fluctuating income, a recent report from the Board of Governors of the Federal Reserve System said. “Volatile income and low savings can turn common experiences — such as waiting a few days for a bank deposit to be available — into a problem.”
Despite unemployment hitting a 49-year low, plus low interest rates and inflation, people are feeling skittish. “A major trade war between the U.S. and China represents our greatest economic risk,” said Lynn Reaser, chief economist of the Controller’s Council of Economic Advisors.
Despite unemployment hitting a 49-year low, people are feeling skittish.
All of these worries are taking their toll. 78% of adults are losing sleep over work, relationships, retirement and other worries, according to a study released Thursday by personal-finance site Bankrate.com. Over half (56%) of Americans are lying awake at night worrying about money.
So what’s preventing people getting enough shut eye? They’re tossing and turning over retirement (24%), health care and/or insurance bills (22%), the ability to pay credit-card debt (18%), mortgage/rent payments (18%), educational expenses (11% versus 26%) and stock-market volatility (5%). The site polled over 2,500 people.
The good news: A higher number of U.S. adults (62%) were losing sleep over money three years ago, and more people were lying awake over retirement (39%), health care and/or insurance bills (29%), mortgage/rent payments (26%), educational expenses (11%) and stock-market volatility (5%). But are sleepless Americans stuck between a rock (the last recession) and a hard place (the longest economic expansion in U.S. history)?
Millions of American believe it can’t last for much longer and fear a downturn is coming: 40% of people in a separate poll by that site say they feel the next recession has already begun or will begin within the next 12 months. These worries, however, are divided along political lines. Democratic Americans are almost twice as likely as Republican Americans to believe it’s already begun.
Jesse Colombo, analyst at Clarity Financial, cautioned readers of his Real Investment Advice column not to underestimate the severity of the next recession. “Virtually everyone is underestimating the tremendous economic risks that have built up globally during the past decade of extremely stimulative monetary policies,” he wrote.
Other signs that people are feeling under pressure and losing sleep. They’re working longer hours to keep up. Nearly half — 45% — of U.S. workers require a side hustle to make ends meet, and even middle-aged workers are feeling the pinch. This includes 48% of millennials, 39% of Generation Xers and 28% baby boomers.
The good news: More people were losing sleep over money three years ago.
The expected benefits of a strong economy has not helped everyone keep up with their daily expenses. Wage growth showed signs of an upswing earlier this year, but disappointed in May. Wages increased just 3.1% on the year in May, not including inflation, slowing from 3.2% the previous month.
But there are global issues that may be far more troubling. After a decade-long economic expansion and stock market growth, some economists say it’s only a matter of time before there’s another downturn. Oxford Economics, a U.K.-based forecasting firm, predicts that fallout from the next recession could trigger a 30% drop in the S&P 500 SPX, -1.22%.
According to the New York Fed’s yield curve-based recession probability model, there is a 27% probability of a U.S. recession in the next 12 months. “The last time that recession odds were the same as they are now was in early 2007, which was shortly before the Great Recession officially started in December 2007,” Colombo added.
‘Everyone should be terrified of the coming recession.’—Jesse Colombo, analyst at Clarity Financial
However, he sees a 64% likelihood of a recession within the next year. “The New York Fed’s recession probability model has underestimated the probability of recessions in the past three decades because it is skewed by the anomalous recessions of the early 1980s,” he added. The New York Fed’s model is based on the Treasury yield curve, which is based on U.S. interest rates.
And, Colombo adds, that model was skewed by a then-Federal Reserve Chairman Paul Volcker’s “unusually aggressive interest rate hikes that were meant to ‘break the back of inflation.’ Looking at the New York Fed’s recession probability model data after 1985 gives more accurate estimates of recession probabilities in the past three decades, he said.
He has a long list of “new bubbles” that people should be losing sleep over. They include global debt, China, Hong Kong, Singapore, the art market, U.S. stocks, U.S. household wealth, corporate debt, leveraged loans, U.S. student loans (currently topping $1.5 trillion), U.S. auto loans, tech startups, global skyscraper construction, U.S. commercial real estate “and U.S. housing once again.”
“I believe that the coming recession is likely to be caused by — and will contribute to — the bursting of those bubbles,” he said. In other words, Colombo argues that Americans have plenty of reasons to lie awake at night wondering when America’s decade-long expansion will finally come to an end. “Everyone should be terrified of the coming recession,” he added.
LBMA is the international trade association that represents the wholesale over-the-counter market for gold and silver bullion. LBMA undertakes many activities on behalf of its members and the wider market, setting industry standards including good delivery and refining standards, ownership of the precious metal benchmark prices as well as serving as a point of contact for the regulatory authorities. For more information, please visit www.lbma.org.uk.
1 August, 2019 Clearing Statistics Daily Averages - June 2019
Clearing Statistics Daily Averages - June 2019
Gold
The volume of ounces transferred in June increased by 30.4% month on month (m/m) to 24.2 million ounces, its highest volume for 18 months. The corresponding value increased by 38% to $32.9 billion. There were 3,997 transfers in June, 34.8% higher m/m, with the clearers settling on average 6,065 ounces per transfer, 3.3% lower m/m.
Silver
The volume of ounces transferred in June increased by 37.6% to 291.4 million ounces, with the corresponding value 37.6% higher at $4.37 billion. There were 1,329 transfers in June, up 35.9% from the previous month, with the clearers settling on average 219,262 ounces per transfer, 1.3% higher m/m. The gold / silver price ratio averaged 90.66 in June, the highest ratio for 26 years. Clearing statistics are published one month in arrears
Download PDF version of complete press release below
Campaign for Liberty Chairman Ron Paul issued the following statement regarding the Federal Reserve’s announcement that it will be reducing interest rates for the first time in a decade:
“The Federal Reserve’s reduction of its benchmark interest rate from 2.25% to 2% is a textbook illustration of a popular definition of insanity: taking the same actions over and over again and expecting different results. Since the stock market meltdown of 2008, the Fed has unsuccessfully tried to pump up the economy via historic low interest rates and Quantitative Easing. As anyone except those who believe the government’s manipulated statistics knows, these policies failed to revive the economy. Instead of acknowledging its mistakes, the Fed is resorting to another rate cut in a desperate—and what will prove futile—attempt to forestall another central bank-created recession, albeit one exacerbated by President Trump’s destructive trade war.
The bright side of the Fed’s failure is that it will increase public interest in Austrian Economics and alternatives to the Fed, such as precious metals and crypto currencies, and auditing and ending the Fed. My Campaign for Liberty organization will continue to mobilize pro-liberty Americans to pass Audit the Fed legislation at the federal level and increase the number of states that have restored gold and silver as legal tender.”
America’s largest bank sounds alarm in face of skyrocketing debt, rise of China
Courtesy of Infowars by Jamie White | JULY 24, 2019
IMAGE CREDITS: PONY WANG/GETTY.
JPMorgan’s Private Bank released a statement to investors warning that not only could the dollar lose its world reserve currency status, but could also “lose its status as the world’s dominant currency.”
In its July investment strategy report, America’s largest bank warned that the dollar’s “exorbitant privilege” as the world’s reserve currency could be “coming to an end.”
“The U.S. dollar (USD) has been the world’s dominant reserve currency for almost a century. As such, many investors today, even outside the United States, have built and become comfortable with sizable USD overweights in their portfolios,” wrote JP Morgan’s Commodities and Rates Strategist Craig Cohen.
“However, we believe the dollar could lose its status as the world’s dominant currency (which could see it depreciate over the medium term) due to structural reasons as well as cyclical impediments.”
The report goes on to say that the downfall of the dollar as the world reserve currency is inevitable given historical trends, and suggests allocating assets to other markets, particularly Asia.
“There is nothing to suggest that the dollar dominance should remain in perpetuity. In fact, the dominant international currency has changed many times throughout history going back thousands of years as the world’s economic center has shifted.”
In fact, JP Morgan’s Chairman of Market and Investment Strategy Michael Cemblast created a graph in 2012 breaking down the world reserve currencies since the 15th century in an effort to highlight the inevitability of the dollar’s decline as the global currency.
Notably, it seems to indicate the U.S. Dollar losing its status sometime in the early 21st century.
The report comes as President Trump and Congress agreed on a bipartisan two-year $2.7 trillion spending package that does nothing to address the bloated spending or national debt, and totally suspends the borrowing limit.
Economist Peter Schiff noted that the budget deal flies in the face of conservative principles of limited government and fiscal responsibility.
Trump finally managed to be the greatest at something. He has managed to negotiate the greatest budget deal disaster in history. No president has signed onto a worse budget deal than this. He sold it to Republicans as a victory. It’s a loss for Republicans and the Republic!
— Peter Schiff (@PeterSchiff) July 23, 2019
Additionally, central banks around the world, including China and Russia, hit a gold ownership-high in April, with gold purchases spiking by 75% in the last year alone to hedge against a volatile dollar.
As long as the dollar is backed by nothing but the Federal Reserve System of credit, countries around the world will continue to hedge against the dollar while the $21 trillion U.S. national debt keeps ticking up.
