EconomyTop News

Pandemic Is Magnet to Pull Treasury Yields Even Lower for HSBC

imageForex11 hours ago (Apr 29, 2020 11:18AM ET)

(C) Reuters. Pandemic Is Magnet to Pull Treasury Yields Even Lower for HSBC

(Bloomberg) — This year’s virus-driven rally in Treasuries is over for most analysts — but not for HSBC Holdings (NYSE:HSBC) Plc’s contrarian bond chief Steven Major.

He sees the yield on benchmark U.S. Treasuries dropping to end the year at 0.5% — that’s the lowest forecast in Bloomberg’s bond yield survey, which sees it climbing instead to around 0.9%. The argument is based on the economic fallout from the coronavirus keeping Federal Reserve rates near zero, said Major, the global head of fixed-income research at HSBC.

“That’s like a magnet pulling yields across the curve down,” Major said in an interview with Bloomberg Television Wednesday.

The rush for haven Treasuries in market turmoil has driven benchmark yields down by more than 130 basis points this year, though the move has petered out this month after huge stimulus measures from central banks and governments. The yield was at around 0.60% Wednesday, ahead of the Fed’s policy announcement.

This isn’t the first time Major’s view has been an outlier. He stuck to a yield forecast for 2.1% in the middle of last year when other analysts were slashing theirs to below 1%. He stood out in 2014 for correctly predicting that yields would drop to about 2.1%, while the median forecast was 3.4%.

The U.S. central bank’s long-run equilibrium rate of interest that neither spurs nor hinders economic activity, or R-Star, is also likely to be a lot lower than initially estimated, according to Major. While the Fed was looking at levels around 50 basis points in the medium to longer term, it could now likely be a negative number, he said.

“The pandemic impact has taken R-Star down a long way,” London-based Major said. “If that’s the case, we need to be resetting our sights on the range for the whole Treasury curve. So I think we will now live below 1% for a very long time.”

(C)2020 Bloomberg L.P.

Pandemic Is Magnet to Pull Treasury Yields Even Lower for HSBC

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Leave a Reply

Your email address will not be published. Required fields are marked *