The Weakness in Bonds Continues

By James Dondero | June 5, 2015

The big news last week was the continued weakness in the bond market, which pushed yields on the benchmark 10-yr US Treasury to a yield of 2.40%. While the highest level in months, it remains to be seen whether this is the start of a meaningful uptrend or whether rates will fall into an extended trading range.
We believe the uptick in yields is largely in response to the recent strength in crude oil, which is holding above the key $58 level. Most commodities however remain in downtrends, suffering from worries of a possible slowdown in China.
We remain bullish on China, as well as India and Germany, and view recent pullback in those markets as very nice entry points.
Finally, it was another mixed week for stocks in the US, with the recent rise in interest rates is clearly proving to be a headwind for sectors which compete with bonds on yield (such as utilities) while the banking stocks are benefitting from the steepening yield curve.