The growth path for the U.S. is the main story and driver and if you look only at bonds today, they suggest some slowing but the ISM Service Report may tell another story so be on the lookout for storm clouds returning about higher U.S. rates, writes Bob Savage Tuesday.
I am in Geneva at a conference. The weather here is sunny with chance of showers. That is a bit like the warnings of the RBA Monday night. There are growing risks to markets everywhere and they rise regardless.
This doesn’t mean we don’t have a wall of worry any more nor that geopolitics don’t matter, but only that the immediate concerns are for putting money to work as the threats from Italy or U.S. trade policy are yet to be fully defined and can be offset by central bankers.
The data dump overnight was about PMI Services and that lifted the UK growth view in 2Q higher driving up the British pound (GBP) and down the FTSE. The rate path for the BOE is static.
The goal of trading markets is to time for wise investment and that is hard to do when you don’t really know what the risk-free rate is or should be. And 3% is still a round number to fear for most models. Going into the U.S. trading day, expect that rate focus to be key with 2.86-3.00% the levels to respect.
View Bob Savage at TradersExpo New York in brief video interviews recorded Feb. 9:
How to create a risk parity portfolio
Duration: 3:25
How I pick assets on the basis of highest yield
Duration: 3:31
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