There is some life in the US 10 year treasury yield. The 10 year yield fell from 3% at the start of year based on expectation that rates will rise to the lows in June.
Looks the 2.45% level could be the lows for the year given the Fed is expected to complete the tapering of bond purchases by Q3 2014 and rate will rise 6 – 9 month after given the condition of the economy.
US Treasury Yield
The interest differential between US dollar and other currencies will support the dollar in the short term especially against the majors of Euro and Japanese Yen. Contrast to the tightening bias of the current Fed policy. ECB and BOJ are still in the loosening phase.
ECB is dragged kicking and screaming in cutting the interest rates from market pressure and to implement further support of the Eurozone sovereign bonds. BOJ on the other hand is doing all it can in maintaining credibility of the continual ease in face of market skepticism.
US 20 year note bond vs emerging market bond
The market looks to expecting the US yields will be supported at current levels given the underperformance of the emerging market bond ETF performance year to date. Given the troubling performance last year in anticipation of bond tapering. Performance going forward is not looking positive.
The equity market is always getting the attention of new highs in the S&P 500 and Dow Jones Average. It has been 40 days since the last time the market indexes has gone up or down more than 1%. This is a slow grind up in conjunction with multi year low in the VIX. We will be cautious with broader market at current levels. But are positive in some specific names.
Twitter (TWTR) has fallen from low $90s at the start of the year to $38. This is based on fear from Wall Street that the user growth (and monetization) will be slower than expected. However our view is that it was a one quarter hiccup in the growth trend.
The world cup and user activity as the result of it (albeit a one time event) shows that user engagement continue to grow on the platform. This could be a model for future user growth through using major events as a driver for growth. We will continue to keep an eye on this space.