Yield Curve Continues to Steepen

US stocks closed slightly down overnight after tracking sideways for most of the trading session. The Senate has now approved the tax bill but for the stock market it seems to be a case of buy the rumour, sell the fact. Although the ASX 200 was barely up yesterday, it is continuing its bull run that has now been in place since early October.  

Bitcoin volatility never fails to disappoint with the cryptocurrency falling from $19,000 to just above $16,000 this week. Many bitcoin exchanges have been having trouble keeping their systems functioning as overwhelming demand puts strain on the network. The mania is now spilling over into stocks with the share prices of several companies skyrocketing after mentioning blockchain or crypto in their marketing materials. For example, microcap company Net Element, listed on the Nasdaq, climbed 272% today for this reason.  

Longer term bond yields have risen again, further steepening the yield curve. The US 10-year note is currently trading on a yield of 2.5%, a 9-month high, while the Australian 10-year is currently at 2.66%. Higher long-term yields imply higher inflation expectations and increased optimism about future economic growth. The final revision of US GDP growth will be released tomorrow and is expected to remain unchanged at 3.3% from the last estimate. The Atlanta Fed is also predicting 3.3% growth for fourth quarter GDP.   

Data Releases:

–    Japan Interest Rate Decision 2:00pm AEDT

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This article was written by William O’Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.