{"id":22115,"date":"2016-11-12T09:38:37","date_gmt":"2016-11-12T14:38:37","guid":{"rendered":"http:\/\/olduvai.ca\/?p=22115"},"modified":"2016-11-12T09:38:37","modified_gmt":"2016-11-12T14:38:37","slug":"deutsche-warns-of-imminent-domino-impact-for-stocks-from-bond-carnage-soaring-dollar","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=22115","title":{"rendered":"Deutsche Warns Of Imminent “Domino Impact” For Stocks From Bond Carnage, Soaring Dollar"},"content":{"rendered":"

Deutsche Warns Of Imminent “Domino Impact” For Stocks From Bond Carnage, Soaring Dollar<\/a><\/h3>\n
\n
\n

One of the more confounding aspects of the record bond selloff experienced in the past few days, is that it not only left broader equity indices unscathed, but took place as the Dow Jones hit a new record high. This, as Goldman explains, is problematic, given that the \u2018low yields for longer<\/em>\u2019 theme, i.e., the infamous “Fed Model” which was used to justify record high stock multiples purely as a function of record low bond yields, that underpins the valuation of several financial assets is under scrutiny. As Goldman puts it: “the continued focus” on the spike in bond yields “seems to us justified.”<\/p>\n

The reason, as Goldman’s Francesco Garzareli cautions, is that “some of the ongoing price action in fixed income ties up well with macro developments and remains overall favourable for risk assets.\u00a0But other traits of the repricing seem inconsistent with fundamentals, and are potentially destabilizing for broader markets.<\/strong>” Where things get interesting, is where Goldman and Deutsche Bank diverge on their opinion whether the recent blow out in yields will serve to limit future equity gains.<\/p>\n

\u00a0Goldman is more sanguine:<\/div>\n
\n
At around 2%, US 10-year Treasuries are now at the low end of the valuation band around our preferred measure of macro \u2018fair value\u2019 in which they fluctuate 68% of the time. Bonds in Germany, the UK and Japan are priced similarly on this dimension, as shown in Exhibit 1 below (by comparison, in the Summer, the degree of departure of yields from their \u2018fair\u2019 levels was a very rare event, occurring on average less than 5% of times).<\/div>\n<\/blockquote>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"

Deutsche Warns Of Imminent “Domino Impact” For Stocks From Bond Carnage, Soaring Dollar One of the more confounding aspects of the record bond selloff experienced in the past few days, is that it not only left broader equity indices unscathed, but took place as the Dow Jones hit a new record high. This, as Goldman […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[88,1839,217,376,1138,839,2721,4318],"class_list":["post-22115","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bonds","tag-deutsche-bank","tag-dow-jones","tag-goldman-sachs","tag-stock-market","tag-us-dollar","tag-us-treasuries","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/22115","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=22115"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/22115\/revisions"}],"predecessor-version":[{"id":22116,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/22115\/revisions\/22116"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=22115"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=22115"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=22115"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}