Invesco Canada blog

Insights, commentary and investing expertise

Yield signs: Deconstructing a key market indicator


April 24, 2018
Subject | Invesco | Macro views

The biggest news of last week was not a tweet, but a Treasury yield – specifically the 10-year U.S. Treasury yield, which rose significantly last week, to 2.95%.1 As of this writing on Monday, the 10-year Treasury was yielding 2.98%, very close to the key 3% level it has not seen in more than four years.1 But what is this key market indicator telling us? And why do people care?

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BoC remains data dependent


April 18, 2018
Subject

The Bank of Canada (BoC) announced it would keep the overnight interest rate at 1.25% at today’s meeting. The outcome was not surprising as North American Free Trade Agreement (NAFTA) negotiations remain unresolved and economic growth in the first quarter showed signs of slowing down.

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As U.S.-China trade drama continues, is a risk-off stance warranted?


April 10, 2018
Subject | Invesco | Macro views

Last week saw an acceleration of the protectionist rhetoric between the U.S. and China. The week ended on a down note, with U.S. President Donald Trump tweeting a proposal for another $100 billion in tariffs, swiftly followed by China, despite its important holiday, promising to match the most recent round of tariffs and fight the U.S. “at any cost.” Following China’s threat, Trump admitted that the U.S. may feel some “pain,” while U.S. Treasury Secretary Steven Mnuchin conceded that, though unlikely, “there is the potential of a trade war.”

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Five things to watch in April


April 3, 2018
Subject | Institutional | Invesco | Macro views

The first quarter of the year has ended with major developed market indices down slightly and major emerging market indices up slightly. But those numbers belie a very turbulent period in which stocks were whipsawed. Bonds also experienced gyrations, with the yield on the 10-year U.S. Treasury moving from 2.41% at the start of the quarter to a peak of 2.94% and ending at 2.74%.1 As we begin the second quarter, there are five critical things to watch.

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Tariffs, trade war concerns help spark equity market sell-off


March 27, 2018
Subject | Invesco | Macro views

It seems we are beginning to smell the faint hint of fear in markets. Not only did stocks sell off globally last week, but investors also fled to the safety of U.S. Treasuries, which drove the 10-year Treasury yield down to 2.817% – a level not seen in weeks. Last week’s market rout was the worst week for stocks in two years.

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The Fed stays the course under its new leader

The Federal Reserve (Fed) raised interest rates by a quarter of a percentage point as expected on Wednesday and signaled two more rate hikes for 2018. It also released its Summary of Economic Projections (SEP) for the next few years, which suggests that the Fed is optimistic regarding the future performance of the U.S. economy.

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Managing interest rate concerns


March 16, 2018
Subject | PowerShares | Smart beta

February’s increased volatility impacted both equities and fixed income, reminding all investors of the havoc that shifting interest rates can have on their portfolios. The correction occurred as U.S. bond yields headed higher, signaling a sell-off in the debt markets while also making equities less appealing.

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Protectionism tightens its grip


March 13, 2018
Subject | Invesco | Macro views

I’ve been warning for some time about the economic dangers of protectionism and the potential for retaliatory policies that could stifle free trade. Last week, this threat intensified – and that was just the tip of the iceberg in a week filled with market-moving news. Below I highlight five critical headlines from last week and preview what’s ahead.

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Good news is bad news: Deconstructing the market sell-off


February 13, 2018
Subject | Institutional | Invesco | Macro views

Stocks globally have experienced more than a week of tumultuous trading, with the U.S. stock market officially in correction territory. And after being relatively sedate for years, the VIX Index has risen dramatically in recent days, indicating rising volatility. Stocks have moved so far so fast that investors have experienced financial whiplash and are trying to understand what caused markets to change course so abruptly. To put it simply, almost everything that should be a positive for stocks is now a negative for stocks.

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Above-trend growth could cause U.S. inflation later in 2018

Employment growth has been strong enough that the Bank of Canada (BOC) hiked its overnight target rate to 1.25% in January.1 The BOC statement attempted to balance the view that growth was near capacity with concerns that raising rates too quickly could cause the economic expansion to stall. The 10-year yield has broken through its previous peak of 2.15% on the growth story and a modest pickup in inflation.2 We believe yields should continue to move higher from these levels.

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What does market volatility mean for fixed income?

Market expectations of inflation have risen in recent days, after signs of wage growth – often seen as a harbinger of inflation – appeared in the January jobs report. We at Invesco Fixed Income believe investor concerns that inflation is finally showing signs of life have helped drive interest rates higher and impacted credit markets, where worries over higher interest rates (and their potential impact on companies) have caused declines in stock markets and other risky assets.1

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A rising tide for fixed income?

In my recent blog on the impact of the tax reform, I explained why I believe the new tax law should be extremely supportive of the U.S. investment grade (IG) bond market, including provisions that could lead to reduced supply. Looking beyond IG, the news appears to look good for other fixed income sectors as well.

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Lessons from the stock market sell-off


February 5, 2018
Subject | Invesco | Macro views

Last week ended on a bad note. The yield on the 10-year Treasury moved up from 2.695% to 2.852% in just five days,1 spiking on the release of the U.S. employment situation report for the month of January. Not only did yields globally then rise, but this brought on the biggest sell-off in U.S. stocks in nearly two years – which then spread to Europe and Asia, putting downward pressure on equities in those regions. As I write this, futures suggest an extension of the sell-off today.

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ETF trading: Keep an eye on volatility


February 1, 2018
Subject | ETFs | PowerShares | Smart beta

Our goal on the PowerShares ETF Capital Markets trading desk is to help our clients experience smooth and efficient ETF trades. In this blog series, I’m highlighting some of the most common guidance we provide. Today, I’m going to look at volatility – how it can distort the bid-ask spread, what to look for and how to get help.

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