However, European core countries' government bond yield did not rise, whilst US treasury bond yields showed bearish steepening yesterday. It was partly caused previous increase in yield in contrast of U.S. market closed due to its holiday. Nevertheless, considering upward revised GDP data, European bond market seemed somewhat solid yesterday. Rather, peripheral countries, especially Spain and Italia, showed lowering movement of government bond yields. And so, the spread between USD bonds and EUR bonds was narrowed.
Though I believe this spread should be narrow in a mid and longer term, I think we should consider where short-term trading of spread will go. But, if it is hard to predict, I prefer OW USD bonds on both of mid and longer run approach and positive carry.
On the other hand, risk assets rose in a low, after released Chinese trade data. (See previous post about this) I don't expect significant Quantitative Tightening effect to lead all of financial assets price tumble. I'm tilted somewhat toward bullish for risk assets.
Chinese SHCOMP index rose 2.3% today.
Global bond yields would be soared in line with "firm" equity markets, "moderate" decrease, not deteriorating meaning crisis of all financial assets, in EMs foreign reserves including China, and monetary tightening policies from U.S. Fed at first, I expect.
I'm quite comfortable on the position that OW USD bonds against EUR, slightly short duration, and steepener on yield curve. But, I should transfer in corporate bond position from financial to other risky sectors to enhance portfolio yields in line with my previous plan. Let's do this on Friday or next week...
2. In Japan, Nikkei225 index was robust by 7.7% with the biggest gain since 2008 as political uncertainty diminished with Abe re-appointed as Prime Minister and in light of robust global risk appetite. JPY weakened against USD above 120 yen once again. Despite of this, I don't expect another QQE3 within coming months. Officially Abe continues to his job for 3 years until his policies are proved fault, possible soon...
3. Euro area GDP in 2Q was revised up from 0.3% to 0.4% which was initial expected number by economists. Moreover, 1Q number was upward revised as well, from 0.4% to 0.5%. Revised 2Q GDP was boosted by consumption expenditures and exports sector. Euro area's growth looks very solid...
4. US NFIB is signaling strong job market, albeit other some sentiment index about employment condition such as in ISM non-manufacturing showed temporary decline.
5. Some people have said the key to resolve inequality of income would be revolution by Proletariat or World War 3 rebooting all. When Thomas Piketty argued ultimately higher tax rate for capital stocks in his best seller, many people were ridiculous about that. That said, given current environment, it's very hard to overcome.
Now, however, it's quite curious that Paul Krugman insisted Donald Trump's economic policy plan to enhance tax rate for the rich somewhat extremely criticized by major Republicans. Anyway, for now, population for him is the highest.
Is it possible politics change the world ultimately?
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