The Weekly Briefing: 5% Treasury yields, geopolitics vs the Fed, China’s dollar dilemma, an AI stock bubble and more
With the 10-year Treasury yield finally hitting 5%, Group Chief Economist Neil Shearing explains the macro risks around rising bond yields, telling David Wilder what this all means for central banks.
He also talks about how policymakers manage geopolitical uncertainty in light of Israel’s conflict with Hamas and talks about how events in the Middle East fit with the idea that the global economy is fracturing into US- and China-led completing blocs.
Plus, Mark Williams tackles market talk that China is dumping its dollars and Bradley Saunders discusses his recent analysis on whether AI hype is fuelling a bubble in stock markets.
Analysis referenced in this episode:
How demand and supply affect Treasury term premia
Estimates suggest that the term premium of US 10-year Treasuries has bounced back to positive territory. We think that this can be at least partly explained by demand and supply factors. And we
From pause to plateau
The ECB is almost certain to leave interest rates unchanged at next week’s meeting. Emphasis will be on monetary policy staying tight for extended period. Bond market sell-off will persuade
The fracturing of the global economy
The shocks caused by the pandemic, the war in Ukraine and US-China tensions will have a lasting impact on the world economy, reversing decades of global integration in some areas while strengthening
What to make of the risks around the Hamas-Israel conflict
Market jitters around the war between Hamas and Israel appear to have stabilised today. But given that the uncertainty on that front is unlikely to fade entirely any time soon, it is worth taking
China is holding on to its dollars
Falls in the value of China’s recorded holdings of US Treasuries tell us little about whether China is divesting from the dollar. A broader look at the data suggests that it isn’t, despite
