Bond yields – Eagerness for yield and confidence in the American corporate sector has driven billions into US junk bond funds. Activity such as this has narrowed corporate spreads over government debt. Meanwhile, 10-year Treasury yields fall to close to 2% on low inflation expectations and increased fear over North Korea.
Euro surges higher – The Euro strengthened to over $1.20 on September 8th, its highest level since January 2015, after Mario Draghi’s tapering comments. The dollar hit a 33-month low over fresh doubts about monetary tightening in the US. Meanwhile, the Yuan has strengthened to fresh highs against the dollar, indicating the Chinese government may have finally succeeded in stemming rapid capital outflows.
Stock markets briefly hit by geopolitical tension, only to reach record highs shortly after – Concerns over North Korea, combined with the damage inflicted by Hurricanes Harvey and Irma, acted as a temporary dampener on US stocks. Yet, on Friday the 15th of September, the S&P 500 once again hit a record-high above 2,500.
Pound hits 15-month high on BOE hawkishness – On Friday September 15th the pound hit a post-Brexit high of $1.36 on the back of claims by MPC officials that a rate rise could come as early as November. The FTSE 100 saw subsequent declines due to how a stronger pound reduces the sterling revenues of global British firms.
Top 30 American firms revealed to have $800 billion in fixed-income investments – The biggest US firms own almost a trillion dollars in Treasury, corporate, agency and municipal debt, FT analysis confirms. This reveals the extent to which large cash piles and muted investment growth have caused non-financial companies to become investment managers in their own right. Many fear that corporate activism in debt markets is adding to unsustainable bond prices.