Latest news with #BrandywineGlobalInvestmentManagement
Bloomberg
27-04-2025
- Business
- Bloomberg
Treasury Market's ‘New World Order' Brings Fear of the Long Bond
The 'Sell America' trade that gripped markets this month has left a potentially lasting dent in investors' willingness to hold the US government's longest-maturity debt, a mainstay of its deficit-financing toolkit. For bond managers at BlackRock Inc., Brandywine Global Investment Management and Vanguard Group Inc., the problem is that as President Donald Trump approaches his 100th day in office, he has generated a growing lists of unknowns, forcing traders to focus on a broad array of issues beyond just the likely path of interest rates.
Yahoo
03-04-2025
- Business
- Yahoo
Truckload volumes and bond yields say recession, not inflation, the bigger risk
The U.S. economy finds itself at a crossroads following President Donald Trump's dramatic announcement of sweeping new tariffs on imports. While some economists fear the tariffs could stoke inflation, key economic indicators – including bond yields and truckload volumes – are flashing warning signs that a recession from suppressed consumer demand and business activity may be the more pressing concern for policymakers and investors alike. On Wednesday, Trump unveiled what he called 'the steepest American tariffs in a century,' imposing a minimum 10% duty on all exports to the U.S. Additionally, the administration slapped even higher tariffs on some 60 nations identified as having large trade imbalances with the United States. The scale and scope of these new trade barriers caught many off guard, with economists warning they could easily knock 1% to 1.5% off U.S. GDP growth and send goods prices through the roof. But rather than sparking fears of runaway inflation from higher import prices, the bond market is signaling deep concern about economic growth prospects. The yield on the benchmark 10-year Treasury note plummeted below 4% on Thursday for the first time since October, dropping as much as 13 basis points in a single day. This precipitous fall in yields reflects a flight to safety among investors suddenly worried about recession risks. When economic uncertainty spikes, traders often pile into government bonds, driving up prices and pushing yields lower. The fact that 10-year yields have fallen this sharply suggests bond traders see a higher likelihood of economic contraction than of persistent money markets are now pricing in a 50% chance that the Federal Reserve will deliver four quarter-point interest rate cuts this year, with the first reduction expected as soon as June. This represents a remarkable shift in sentiment from just days ago, when most analysts expected rates to remain on hold throughout 2025. 'The bond market is keying off of the negative growth impact rather than any inflation concern from the new tariff regime,' explained Jack McIntyre, portfolio manager at Brandywine Global Investment Management. He added that 'the odds of recession are increasing given the timing of tariffs and tax policy.' This gloomy bond market outlook aligns with other indicators suggesting softening economic demand. Notably, data on freight volumes paint a concerning picture. The Outbound Tender Volume Index, which measures requests for truckload capacity, has averaged nearly 9% lower year over year since mid-February. This decline in trucking demand often serves as an early warning sign of broader economic weakness. The Outbound Tender Volume Index represents the volume of truckload shipments electronically tendered by shippers. (Chart: SONAR. To learn more about SONAR, click here).While intermodal volumes have shown more resilience, growing at a 5% rate since the start of the year, the sharp drop in truckload demand has not been fully offset. This indicates that downstream consumption may be weaker than headline figures suggest. As one industry analyst noted, 'sustaining inventory growth without an increase in consumption is not viable' in the long run. The confluence of plunging bond yields and softening freight volumes reinforces the argument that recession risk, not inflation, should be the primary focus for policymakers in the coming months. While the Federal Reserve has spent much of the past year battling inflation, these latest signals suggest they may soon need to pivot toward supporting economic growth. Some argue the tariffs could still stoke inflationary pressures in certain sectors. However, the broader macroeconomic impact appears tilted toward slower growth and even recession risk. Bob Michele, global head of fixed income at JPMorgan Asset Management, was blunt on Bloomberg TV: 'It looks like we're cruising to recession now unless things change.' For investors and policymakers alike, the days and weeks ahead will be crucial in determining whether these recessionary signals prove prescient or premature. Friday's jobs report will provide an important gauge of labor market health, while upcoming corporate earnings and guidance will shed light on how businesses are navigating the suddenly treacherous economic waters. What is clear is that Trump's tariff bombshell has dramatically reshaped the economic outlook. While inflation remains a concern, the sharp reaction in bond yields and worrying trends in freight volumes suggest the greater threat may be a significant slowdown in growth. The post Truckload volumes and bond yields say recession, not inflation, the bigger risk appeared first on FreightWaves. Sign in to access your portfolio
Yahoo
06-03-2025
- Business
- Yahoo
Euro's Best Rally Since 2015 Fans Bets on Further 10% Surge
(Bloomberg) -- The euro's best three-day rally since 2015 is encouraging traders to bet the currency will rise 10% further in coming months. Republican Mayor Braces for Tariffs: 'We Didn't Budget for This' Trump Administration Plans to Eliminate Dozens of Housing Offices How Upzoning in Cambridge Broke the YIMBY Mold NYC's Finances Are Sinking With Gauge Falling to 11-Year Low Remembering the Landscape Architect Who Embraced the City Hedge funds are buying options betting that the currency could reach as high as $1.20 in six to nine months, according to FX traders familiar with the transactions who asked not to be identified because they aren't authorized to speak publicly. That level was last seen in 2021. Options sentiment, as depicted by so-called risk reversals, turned most bullish on the euro in five years, while data from the Depository Trust & Clearing Corp. show that two out of three options this week targeted a stronger euro. The common currency rose 1.5% to $1.0789 Wednesday, the highest in four months, and had its biggest three-day gain since August 2015 after Germany announced plans to unleash hundreds of billions of euros for defense and infrastructure spending. 'To me the initial move is to $1.12,' said Jack McIntyre, a portfolio manager at Brandywine Global Investment Management. 'But if I'm right, this thing could have more legs, meaning that you start getting up into the $1.20 area.' The anticipated historic increase in German borrowing, along with growing concerns about the negative impact of aggressive tariffs on the US economy, are supporting the euro, prompting a rush by investors for topside exposure. The euro has jumped above the closely watched 200-day moving average. A close above that level would signal further gains to traders who watch technical measures, opening the door for a test of last year's highs around $1.12. That's a sharp contrast to prevailing expectations earlier this year that the euro was headed for parity against the greenback. 'The euro-dollar market dynamics are undergoing significant shifts,' said Julian Weiss, head of global G-10 vanilla FX options trading at Bank of America, noting that demand for euro call options has surged. 'This development may signal the onset of a new trend, potentially reversing the multi-year US dollar rally.' Some analysts, however, are questioning whether the rally is sustainable. 'The dollar depreciation momentum could have further to run and while we abandoned our call for EUR/USD to drop below parity, we maintain our view that renewed US dollar strength is still likely,' said Derek Halpenny, head of FX research at MUFG. --With assistance from Naomi Tajitsu, Alice Atkins and Anya Andrianova. (Updates market prices throughout.) The Mysterious Billionaire Behind the World's Most Popular Vapes Rich People Are Firing a Cash Cannon at the US Economy—But at What Cost? Greenland Voters Weigh Their Election's Most Important Issue: Trump Trump's SALT Tax Promise Hinges on an Obscure Loophole Snack Makers Are Removing Fake Colors From Processed Foods ©2025 Bloomberg L.P.
Yahoo
05-03-2025
- Business
- Yahoo
German Bond Yields Spike Most Since 2022 on Investment Plans
(Bloomberg) -- German bonds slumped and the euro surged as investors braced for an historic increase in borrowing to fund defense and infrastructure investment. How Upzoning in Cambridge Broke the YIMBY Mold Remembering the Landscape Architect Who Embraced the City Republican Mayor Braces for Tariffs: 'We Didn't Budget for This' NYC's Finances Are Sinking With Gauge Falling to 11-Year Low US Tent Facility is Holding Migrant Families Longer Than Recommended Yields surged the most since mid-2022, the euro rose to a four-month high and stocks rallied after chancellor-in-waiting Friedrich Merz outlined a sweeping fiscal overhaul that could boost the European economy. In the midst of the turmoil, Germany attracted solid demand for a sale of new 30-year bonds. Merz's Christian Democratic-led bloc and the rival Social Democrats are speeding ahead with plans to boost investment rather than wait out a months-long process to form a governing coalition. As well as a €500 billion ($533 billion) special fund for infrastructure, they proposed defense spending over 1% of GDP would be exempt from the country's constitutional borrowing limits, known as the debt brake. 'It feels like a game changer,' said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. He said he has been adding to his fund's long euro position since Merz' announcement. The yield on 10-year notes rose as much as 23 basis basis points to 2.73%, the biggest jump since June 2022. The euro gained 0.9% to $1.0722, and was on course for its biggest three-day gain since late 2022. Investors had already started to price in the prospect of Germany dialing back its tight fiscal rules following the election. The 10-year yield has risen over 30 basis points so far in 2025, more than most other bonds in the region. A measure of bunds' attractiveness relative to swaps has hit successive record lows in data going back to 2007. Still, German yields remain the lowest among nations in the euro area, reflecting years of fiscal conservationism that have left the country with a limited debt pile. Both investors and officials at the nation's central bank have urged politicians to spend more in order to give the economy an investment boost. European governments are under pressure to move swiftly because of US President Donald Trump's determination to force a quick settlement to the war in Ukraine. On Tuesday, European Commission President Ursula von der Leyen proposed the European Union extend €150 billion in loans to boost defense spending as the bloc and loosen fiscal rules constraining national spending. 'These impressive plans underline that the authorities are thinking big and funding capacities could be maxed to the limit in coming years,' said Christoph Rieger, head of rates and credit research at Commerzbank AG. German bonds led yields higher across the region, with 10-year rates from France to Italy and the UK all up more than 10 basis points on the day. The nation was on course to sell €6 billion in new 30-year bond via banks, in line with analysts expectations. Demand was above €36 billion and the notes were expected to pay 3.25 basis points over a comparable bond, less than the initial price guidance of four basis points, according to a person familiar with the matter. Economic Boost The side effect of Germany's new fiscal impulse might be a boost to the bloc's economy. The country's unwillingness to spend has been long been pinpointed as a reason for sluggish growth, particularly compared to the US. European Central Bank officials may address the impact on their growth and inflation outlooks on Thursday. Traders have eased off bets on further monetary easing, pricing less than 75 basis points of further interest-rate cuts this year, compared to about 84 basis points before the investment plan was announced. The euro's rapid advance on the back of more discussion about defense spending has fueled bets in the market that it will gain more than 10% in coming months to $1.20, a level last seen in 2021. Options sentiment, as depicted by so-called risk reversals, turned most bullish the euro in five years, while data from the Depository Trust & Clearing Corp. show that two out of three options this week targeted a stronger euro. The rally has also seen the likes of Goldman Sachs Group Inc., as well as MUFG and TD, ditch predictions that the currency will fall to parity with the dollar this year, while firms including Deutsche Bank and Societe Generale are now recommending buying the euro. 'Europe and Germany in particular are showing a historically unprecedented responsiveness to revising the fiscal stance,' said George Saravelos, head of global FX strategy at Deutsche Bank, who is targeting a further rally in the euro to $1.10. 'The broadening out of the German fiscal package but more importantly the speed and the 'whatever it takes' nature of the policy response have the capacity to create more front-loaded support.' --With assistance from James Hirai. (Updates with latest on German bond sale, context on euro.) The Mysterious Billionaire Behind the World's Most Popular Vapes Rich People Are Firing a Cash Cannon at the US Economy—But at What Cost? Snack Makers Are Removing Fake Colors From Processed Foods Trump's SALT Tax Promise Hinges on an Obscure Loophole The US Is Withdrawing From Global Health at a Dangerous Time ©2025 Bloomberg L.P. Sign in to access your portfolio
