Yields Are Askew

Published Thu, 12 Nov 2020 09:08:15 -0500 on Seeking Alpha

Seeking AlphaToday's Market | Market OutlookYields Are AskewNov. 12, 2020 9:08 AM ET|| Includes: BIL, DDM, DFVL, DFVS, DIA, DOG, DTUL, DTUS, DTYL, DXD, EDV, EEH, EGF, EPS, EQL, EUFN, FEX, FIBR, GBIL, GOVT, GSY, HUSV, IEF, IEI, IVV, IWL, IWM, JHML, JKD, OTPIX, PLW, PSQ, PST, QID, QLD, QQEW, QQQ, QQQE, QQXT, RINF, RSP, RWM, RYARX, RYRSX, SCHO, SCHR, SCHX, SDOW, SDS, SH, SHV, SHY, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SQQQ, SRTY, SSO, SYE, TAPR, TBF, TBT, TBX, TLH, TLT, TMF, TMV, TNA, TQQQ, TTT, TWM, TYD, TYO, TZA, UBT, UDN, UDOW, UDPIX, UPRO, URTY, USDU, UST, UUP, UWM, VFINX, VGIT, VGLT, VGSH, VOO, VTWO, VUSTX, VV, ZROZby: Mark J. GrantMark J. Grant Chief Strategist, bonds, Special Situations, portfolio strategySummaryThe ECB is far more supportive of its countries than the Fed is supportive of America.
There are those that think yields in America will go much higher from our present levels.
I am not of this opinion.
You might look at the following chart and wonder why it is that the world's largest economy, with the world's largest bond market, has the highest yields. It is a good question and one worthy of some examination. Is it because of inflation? No. Is it because of political unrest? No. Is it because of a lack of growth? No. The answer rests upon one fact, and only one fact, which is the behavior of our central bank.
The Fed currently has assets of $7.1 trillion while the ECB has ramped up their assets to $8.0 trillion. This is all, however, before the European Central Bank's recent statement, virtually promising to ramp up their assets even further, in December. The truth of it is that those that make the money make the rules, and dominate and control the markets, and there is just no way around this proposition.
These spreads also tell you something else which is that the ECB is far more supportive of its countries than the Fed is supportive of America. You may think this is a strong statement, but the numbers belie the... Read more