Portfolio Watch: Investing Is a Winter Sport – and This Year Is No Different
Happy Friday from Copenhagen!
The term premium scare over the past 3-5 weeks has been driven by a mix of 1) high incoming supply of U.S. Treasuries (USTs) and 2) a repricing of growth and inflation expectations following the Fed’s 50 bp cut.
This impact is likely to ease as we approach the debt ceiling, and the Quarterly Refunding Announcement (QRA) on Monday should be relatively benign. With the Treasury General Account (TGA) currently running more than $150 billion above target levels, Yellen and her team have limited reason to increase issuance—quite the opposite, in fact.
Chart 1: Term premiums often rise in October
The stars are aligning for a strong end to the year in both fixed income and equities! Inflation is stabilizing, liquidity is increasing, and growth is only softening gradually—a benign cocktail.
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