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.

 

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