Predicting the Markets: Chapter 11 Charts: Predicting Bonds

Transcription

1 Predicting the Markets: Chapter 11 Charts: November 1, 1 Dr. Edward Yardeni eyardeni@ Mali Quintana aquintana@ Please visit our sites at www. blog. thinking outside the box

2 Table Of Contents Table Of Contents 1- November 1, 1 / Chapter 11 Charts: www.

3 1 Figure 1. US TREASURY -YEAR BOND YIELD: (percent, daily) Source: Federal Reserve Board. 1 1 Figure. US CONSUMER PRICE INDEX: (yearly percent change, monthly) Source: Bureau of Labor Statistics. Page 1 / November 1, 1 / Chapter 11 Charts: www.

4 Figure 3. FEDERAL FUNDS RATE: (percent, weekly) Source: Board of Governors of the Federal Reserve System. Figure. US BANK PRIME LOAN RATE: (percent, weekly) Source: Board of Governors of the Federal Reserve System. Page / November 1, 1 / Chapter 11 Charts: www.

5 1 11 Figure. US UNEMPLOYMENT RATE: (percent, monthly) Source: Bureau of Labor Statistics Figure. REAL GDP: (trillion 9 dollars, saar, quarterly, ratio scale) Source: US Department of Commerce, Bureau of Economic Analysis. 3. Page 3 / November 1, 1 / Chapter 11 Charts: www.

6 Figure 7. US TREASURY BOND YIELD & NOMINAL GDP GROWTH US Treasury -Year Bond Yield (percent) (1.) Nominal GDP (yearly percent change) (.) Q3 Oct Source: US Department of Commerce, Bureau of Economic Analysis, and Board of Governors of the Federal Reserve System. 1 Figure. SPREAD BETWEEN US TREASURY BOND YIELD & NOMINAL GDP GROWTH* (percentage points) 1 Spread (-1.) - Q * -year bond yield minus yearly percent change in nominal GDP. Source: US Department of Commerce, Bureau of Economic Analysis, and Board of Governors of the Federal Reserve System. Page / November 1, 1 / Chapter 11 Charts: www.

7 3 3 3 Figure 9. WEST TEXAS INTERMEDIATE CRUDE OIL PRICE: (dollars per barrel, monthly, ratio scale) Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Haver Analytics...3 Figure. HOUSING STARTS (million units, saar, monthly) Source: US Department of Commerce, Bureau of the Census..9.7 Page / November 1, 1 / Chapter 11 Charts: www.

8 11 Figure 11. US TREASURY -YEAR BOND YIELD: 197- (percent, daily) Source: Federal Reserve Board Figure 1. DOW JONES INDUSTRIALS AVERAGE: 197- (daily) Source: Dow Jones Inc Page / November 1, 1 / Chapter 11 Charts: www.

9 3 Figure 13. AGE WAVE, INFLATION, & BOND YIELD IN THE US -Year Treasury Bond Yield*** Age Wave* Inflation Trend** Oct * Percent of labor force 1-3 years old. ** Five-year moving average of yearly percent change in CPI. *** Five-year moving average of ten-year government bond yield. Source: US Department of Labor, Bureau of Labor Statistics and Board of Governors of the Federal Reserve System. Figure 1. EQUITY & BOND MUTUAL FUNDS (cumulative flows since 199, trillion dollars) 3 Cumulative Net Inflows Equity Mutual Funds (.) Bond Mutual Funds (3.) Sep Source: Investment Company Institute. Page 7 / November 1, 1 / Chapter 11 Charts: www.

10 .. Figure 1. FED S ASSETS* (trillion dollars) QE1 QE QE Total Assets US Treasuries + Agency Debt + MBS * Average of daily figures for weeks ending Wednesday. Note: QE1 (11//) = Fed starts buying $1.tn in mortgage securities. QE1 expanded (3/1/9) = Fed starts buying $3bn in Treasuries. QE (11/3/) = Fed starts buying $bn in Treasuries. QE3 (9/13/1) = Fed starts buying $bn/month in mortgage securities (open ended). QE3 expanded (1/1/1) = Fed starts buying $bn/month in Treasuries. Source: Federal Reserve Board. Figure 1. FED S ASSETS* (trillion dollars) QE1 QE QE US Treasury Securities Agency Debt + MBS * Average of daily figures for weeks ending Wednesday. Note: QE1 (11//) = Fed starts buying $1.tn in mortgage securities. QE1 expanded (3/1/9) = Fed starts buying $3bn in Treasuries. QE (11/3/) = Fed starts buying $bn in Treasuries. QE3 (9/13/1) = Fed starts buying $bn/month in mortgage securities (open ended). QE3 expanded (1/1/1) = Fed starts buying $bn/month in Treasuries. Source: Federal Reserve Board. Page / November 1, 1 / Chapter 11 Charts: www.

11 ... Figure 17. US TREASURY -YEAR BOND YIELD (percent) QE1 QE QE Note: QE1 (11//) = Fed starts buying $1.tn in mortgage securities. QE1 expanded (3/1/9) = Fed starts buying $3bn in Treasuries. QE (11/3/) = Fed starts buying $bn in Treasuries. QE3 (9/13/1) = Fed starts buying $bn/month in mortgage securities (open ended). QE3 expanded (1/1/1) = Fed starts buying $bn/month in Treasuries. Source: Federal Reserve Board. Figure 1. S&P INDEX QE1 QE QE3 S&P Index US Treasuries + Agency Debt + MBS (trillion dollars) Note: QE1 (11//) = Fed starts buying $1.tn in mortgage securities. QE1 expanded (3/1/9) = Fed starts buying $3bn in Treasuries. QE (11/3/) = Fed starts buying $bn in Treasuries. QE3 (9/13/1) = Fed starts buying $bn/month in mortgage securities (open ended). QE3 expanded (1/1/1) = Fed starts buying $bn/month in Treasuries Source: Standard & Poor s Corporation. Page 9 / November 1, 1 / Chapter 11 Charts: www.

12 1 1 1 Figure 19. EUROZONE: GOVERNMENT -YEAR BOND YIELDS (percent, monthly) NIRP E D QE QEE France (.33) Germany (.) Italy (1.7) Spain (1.11) - Oct Note: D (7//1) = ECB President Mario Draghi pledged to do "whatever it takes" to defend the euro. NIRP (//1) = negative interest-rate policy. QE (1//1) = quantitative easing. QEE (3//1) = expansion and extension of QE with corporate bond purchases started /1/1. Source: Haver Analytics. - Figure. GREECE: GOVERNMENT -YEAR BOND YIELD (percent, daily) / Source: Haver Analytics. Page / November 1, 1 / Chapter 11 Charts: www.

13 Figure 1. EUROZONE: GOVERNMENT -YEAR BOND YIELDS (percent, daily) France (.7) Germany (.3) Italy (.) Spain (1.) D NIRP QE QEE Note: D (7//1) = ECB President Mario Draghi pledged to do "whatever it takes" to defend the euro. NIRP (//1) = negative interest-rate policy. QE (1//1) = quantitative easing. QEE (3//1) = expansion and extension of QE with corporate bond purchases started /1/1. Source: Haver Analytics. 11/ Figure. ECB DEPOSIT RATE & GERMAN GOVERNMENT -YEAR BOND YIELD (percent, daily) 3 Germany: Year Bond Yield (.3) ECB Deposit Rate (-.) /11 11/ Source: European Central Bank and Haver Analytics. -1 Page 11 / November 1, 1 / Chapter 11 Charts: www.

14 Figure 3. ECB: HOLDINGS OF SECURITIES (billion euros, ratio scale) 11/ D NIRP QE QEE 1..7 Securities of Euro Area Residents in Euro D = ECB President Mario Draghi pledged to do "whatever it takes" to defend the euro (7//1). NIRP = negative interest-rate policy (//1). QE (1//1). QEE = expansion and extension of QE (3//1, corporate bond purchases started /1/1). Source: European Central Bank..1 Figure. JAPAN: INTEREST RATES (percent, weekly) -Year Government Bond Yield (-.) Bank of Japan Overnight Rate (-.) 11/ Z = Zero Interest Rate Policy. Note: Blue shade is Quantitative Easing Policy. Source: Bank of Japan. - Page 1 / November 1, 1 / Chapter 11 Charts: www.

15 3 Figure. JAPAN: RESERVE BALANCES AT BOJ (trillion yen, reserve adjusted) Z Oct Z = Zero Interest Rate Policy. Note: Blue shade is Quantitative Easing Policy. Source: Bank of Japan Figure. JAPAN: US$/YEN (daily) A QQE QQEE NIRP Yen (.9) /11.9. YC day moving average Note: A = Markets start to anticipate Abenomics. QQE is Quantitative and Qualitative Easing. QQEE is the expanded and extended version of QQE. NIRP = negative interest rates. YC = Yield curve targeting. Source: Haver Analytics.. Page 13 / November 1, 1 / Chapter 11 Charts: www.

16 Figure 7. GOVERNMENT -YEAR BOND YIELDS (percent, daily) US (.7) Japan (-.3) Germany (.3) / Source: Haver Analytics Figure. EXPECTED INFLATION IN -YEAR TIPS* (percent, daily) Expected Inflation (1.) / * Nominal minus TIPS yield. Source: Board of Governors of the Federal Reserve System. Page 1 / November 1, 1 / Chapter 11 Charts: www.

17 1 Figure 9. EXPECTED INFLATION: SURVEY OF PROFESSIONAL FORECASTERS 1 Professional Forecasters* (.) CPI: Ex Food & Energy (yearly percent change) (.) Sep * Median forecast of year-over-year CPI inflation rate over the next years using Philadelphia Fed Survey of Professional Forecasters data (monthly series interpolated from quarterly data starting as two quarters per year during Q-1979 until Q-1991 when the data continue with four quarters per year). Source: Bureau of Labor Statistics and Federal Reserve Bank of Philadelphia. 3. Figure 3. MEASURES OF EXPECTED INFLATION (percent) Sep 11/ Expected Inflation Professional Forecasters* (.) -Year TIPS** (1.9) * Median forecast of year-over-year CPI inflation rate over the next years using Philadelphia Fed Survey of Professional Forecasters data (monthly series interpolated from quarterly data starting as two quarters per year during Q-1979 until Q-1991 when the data continue with four quarters per year). ** Nominal -year Treasury yield minus -year TIPS yield. Source: Board of Governors of the Federal Reserve System and Federal Reserve Bank of Philadelphia. Page 1 / November 1, 1 / Chapter 11 Charts: www.

18 Figure 31. GOLD PRICE & -YEAR TIPS YIELD (daily) Gold Price* (dollars per ounce) (13.) -Year TIPS Yield (percent, inverted scale) (.7) / 11/ * Cash price. London gold bullion, PM Fix. Source: Board of Governors of the Federal Reserve System Figure 3. REAL BOND YIELD & NOMINAL FEDERAL FUNDS RATE Real -Year Treasury Yield* (-.) Nominal Federal Funds Rate (.) Oct Sep * US Treasury -year bond yield minus median forecast of year-over-year CPI inflation rate over the next years using Philadelphia Fed Survey of Professional Forecasters data (monthly series interpolated from quarterly data starting as two quarters per year during Q-1979 until Q-1991 when the data continue with four quarters a year). Source: Board of Governors of the Federal Reserve System, US Treasury, Thomson Reuters I/B/E/S, and Federal Reserve Bank of Philadelphia. Page 1 / November 1, 1 / Chapter 11 Charts: www.

19 1 Figure 33. US FED FUNDS RATE & YEAR BOND YIELD & BUSINESS CYCLE (percent, monthly) -Year_Bond_Yield (1.7) Federal Funds Rate (.) 1 Oct Oct * -year Treasury yield less federal funds rate. Monthly through 197, then weekly. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Board of Governors of the Federal Reserve System. Figure 3. US YIELD CURVE & BUSINESS CYCLE (basis points, monthly) Oct * -year Treasury yield less federal funds rate. Monthly through 197, then weekly. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Board of Governors of the Federal Reserve System. Page 17 / November 1, 1 / Chapter 11 Charts: www.

20 1 Figure 3. CORPORATE & TREASURY -YEAR BOND YIELDS (percent, monthly) Corporate Bond Yield:Baa* (.3) -Year Bond Yield (1.) Oct Note: Shaded areas denote recessions according to the National Bureau of Economic Research. * Moody s seasoned Baa corporate bond yield from 19 to 199, BOFA Merrill Lynch corporate bond yield thereafter. Source: Federal Reserve Board. Figure 3. YIELD SPREAD CORPORATE & TREASURY -YEAR BONDS (basis points, monthly) Spread of Corporate Bond Yield*: Baa & -Year Bond Yield (.1) 3 3 Oct Note: Shaded areas denote recessions according to the National Bureau of Economic Research. * Moody s seasoned Baa corporate bond yield from 19 to 199, BOFA Merrill Lynch corporate bond yield thereafter. Source: Federal Reserve Board. Page 1 / November 1, 1 / Chapter 11 Charts: www.

21 9 Figure 37. S&P VIX & HIGH YIELD CORPORATE BOND SPREAD 7 S&P VIX (1) High-Yield Corporate Spread* (7) /11 * US high-yield corporate bond yield less -year Treasury bond yield (basis points). Source: Chicago Board Options Exchange and Board Of Governors of the Federal Reserve System. - Figure 3. ECRI WEEKLY LEADING INDEX & HIGH YIELD CORPORATE SPREAD (basis points, inverted scale) High-Yield Corporate Spread* ECRI Weekly Leading Index (199=) / 11/ Note: Shaded areas denote recessions according to the National Bureau of Economic Research. * High yield corporate less -year Treasury yield. Source: Merrill Lynch, Board of Governors of the Federal Reserve System, and Economic Cycle Research Institute (ECRI). Page 19 / November 1, 1 / Chapter 11 Charts: www.

22 Figure 39. US FEDERAL GOVERNMENT BUDGET DEFICIT (as a percent of nominal GDP) Q Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: US Department of Commerce, Bureau of Economic Analysis. Figure. US FEDERAL GOVERNMENT EXPENDITURES & RECEIPTS (as a percent of nominal GDP) Expenditures (.) Q3 1 Q 1 1 Receipts (1.) Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: US Department of Commerce, Bureau of Economic Analysis. Page / November 1, 1 / Chapter 11 Charts: www.

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