Yesterday, the yield on the 10-year Treasury paused from setting new record lows, though it’s unclear if the long-term decline in interest rates has truly ended. The benchmark rate rose slightly to 1.40% on July 8, hovering just above Monday’s historic low of 1.37%. As always, caution is warranted when contemplating the possibility of even lower yields. However, global trends, particularly the rise in negative interest rates, suggest that it may be premature to dismiss a persistently downward trend that has puzzled analysts for decades.
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In June, private payrolls in the United States increased by 172,000, according to the latest ADP Employment Report. While this number is modest compared to previous years, it represents the strongest growth since March. Nevertheless, the annual growth rate has decreased to a three-year low, indicating further deceleration in the labor market’s expansion.
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After reaching an all-time low of 1.37% on Tuesday, the 10-year Treasury yield increased slightly to 1.38% yesterday (July 6), according to data from Treasury.gov. Has the trend of falling yields come to an end? The answer lies in forthcoming economic data. Currently, recent U.S. figures present mixed messages, and uncertainties related to the post-Brexit landscape add to the confusion.
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The anticipated risk premium for the Global Market Index (GMI) decreased in June, marking the first decline since last December. GMI, a market-value weighted mix of the major asset classes, is now projected to yield an annualized risk premium of 3.3% in the long term, slightly lower than last month’s forecast. (Additional details on the equilibrium-based methodology for forecasting are summarized below.)
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June proved to be a strong month for most major asset classes. Despite the market turbulence following the Brexit vote, by June 30, the overall trend showed a significant positive shift.
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The Capital Spectator will observe a long weekend in honor of the 240-year anniversary of Independence Day here in the United States. Regular updates will return on Tuesday, July 5, following the fireworks and the inevitable ringing in your editor’s ears.
Happy Birthday, America!
The upcoming “advance” GDP report for the second quarter is expected to show a recovery from the sluggish 0.8% growth in Q1 (predicted to be revised to 1.0% according to Econoday.com). However, the outlook has become more uncertain following last week’s Brexit vote. While the U.S. might be somewhat shielded from economic fallout, a new forecast by Goldman Sachs suggests otherwise. The bank has revised its GDP growth expectation for the second half of this year down to 2% from a previous estimate of 2.25%, as reported by Reuters.
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Global equity markets faced significant declines at the end of last week after Britain voted to exit the European Union. Sharp losses were recorded across many indices following the June 24 trading week. Interestingly, U.S. junk bonds posted a small gain, outperforming other major asset classes based on various proxy ETFs. Investment-grade bonds in the U.S. also showed slight increases, while most other sectors experienced declines.
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In this revised version, the article maintains its original structure while enhancing readability and fluidity. The text is clearer and more engaging, providing valuable insights into economic trends and their implications.
