February 7, 2019 Bonds Rally as the EU Fades by Lester Murray
The Treasury market is rallying after the release of disappointing news from the European Union. The EU's Executive Commission cut its 2019 growth forecast for the 19 nations that share the Euro as their coin-of-the realm. The previous projection of 1.9% was substantially reduced to a 1.3% expectation. A variety of challenges, from trade issues to Brexit uncertainty to China's slowdown have cast a pall over Europe's economic outlook.
Germany, the largest economy in the 28 member European Union (not everybody uses the Euro), had its forecast slashed to 1.1% from 1.8% with the forecast for all 28 downgraded to 1.5% from 1.9%. Bad news for Berlin is good news for bonds as Treasury prices are up all along the curve. The Ten-Year yield has fallen a few basis points to 2.65% while the Two-Year has slipped to just below 2.50%. As for the yield curve's slope, if it rained on the 52 week bill, the water would run downhill for about six years. The DJIA is down about 150 points in early trading.
Posted on Thu, February 7, 2019
by Lester Murray