Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
What Is The Real Reason For HSBC To Accumulate So Much Debt?
#1
[Image: 1000x-1.jpg]

It's an article of faith in the credit markets that certain fundamental forces propel the yields on government debt, specifically economic growth, state spending, inflation and central bank guidance.

https://www.bloomberg.com/news/articles/...wrong-hsbc
Reply
#2
Not so, says HSBC Holdings Plc fixed-income analysts led by Steven Major. Instead, high debt levels, demographic forces and wealth inequality overwhelm the traditional forces cited for the feared unravelling of the bond market's 35-year bull run this year.
Reply
#3
"We show that many of the common rules of thumb or ‘heuristics’ that are applied to bond yields are simply false," Major wrote in a client note this week.
Reply
#4
Major and his team believe that while Treasuries reflect key economic data, it's not clear that they're still the principal drivers of yields.
Reply
#5
The report also defends Major's eye-catching prediction last November that 10-year Treasury yields will hit 1.35 percent at end of 2017, compared with the median forecast of 2.75 percent in a Bloomberg survey.
Reply
#6
Take a look at what Major and his team consider four common misconceptions cited by bond bears.
Reply
#7
1. Bond yields dance to the beat of nominal economic growth

Surprisingly, there isn't a strong long-term correlation between the movement of Treasury yields and U.S. economic momentum before inflation, as seen in the weak relationship between growth surprises and changes in 10-year yields relative to their forecasts.
Reply
#8
[Image: 800x-1.png]

2. Fiscal loosening triggers an upturn in Treasury yields
Reply
#9
It's not clear that Treasury supply dramatically affect yields, as evidenced by the weak relationship between year-over-year changes in debt-to-GDP levels and the five-year, five-year forward inflation rate.
Reply
#10
[Image: 800x-1.png]

3. Fed guidance drives yields
Reply


Forum Jump:






Users browsing this thread: 1 Guest(s)