Increase in fear level

Posted: August 21, 2013 in Uncategorized

The bond market is sending strong alert warning. The US Treasury bond yield is actually yielding more than 2.8%pa after the largest bond outflow in US history (foreign owners dumped over USD40 billion in one month!).

This sharp rise (last year the 10 year T bond was at 1.7%pa) cannot not have an effect on the stock market at least between now (specially after the 2 September when Northern Hemisphere investors come back from holiday) and the 18 September (the day in which the FED will really say what they do about tapering).

We could be in for a 5%/10% selloff (ASX200: 4,600/4,750). It also could be that the sell off will stop the Fed.

But definitely a yield over 2.8%pa on the 10y US T-Bond will have an effect.

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