Weekly Market Recap
Asia Pacific
11/05/2020
Week in review
- Australia trade surplus hits record $10.3bn
- U.S. unemployment rate surges to 14.7%
- Global PMI for services plunges
Week ahead
- Australia labour market report
- Westpac consumer confidence
- China retail sales
Thought of the week
For the first time ever, markets started to price in a chance that the cash rate in the U.S. would fall below zero. Something that is highly unlikely to occur given the push back from the U.S. Fed on whether the use of negative rates is beneficial. Technical factors were the likely culprit as investors repositioned for increasing issuance of short dated bonds to fund government spending. The next challenge is what the market and the Fed will do when the U.S. Treasury starts to issue longer dated government bonds to fund a ballooning debt level, and a debt-GDP-ratio that is expected to be higher than during WWII. If yields are to stay low, then buyers need to be found, and that means more purchases by the Fed unless other large holders of Treasuries can soak up all the new bonds.
U.S. federal net debt (accumulated deficits)
Source:CBO, J.P. Morgan Asset Management, all returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.
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