Posted on

Fear of Inflation Finds a Foothold in the Bond Market

The so-called bond vigilantes may be back, 30 years after they led a sell-off in Treasury securities over the prospect of higher government spending by a new Democratic administration.The Federal Reserve has downplayed the risk of inflation, and many experts discount the danger of a sustained rise in prices. But there is an intense debate underway on Wall Street about the prospects for higher inflation and rising interest rates.Yields on 10-year Treasury notes have risen sharply in recent weeks, a sign that traders are taking the inflation threat more seriously. If the trend continues, it will put bond investors …

Read More

Posted on

The Financial Crisis the World Forgot

By the middle of March 2020 a sense of anxiety pervaded the Federal Reserve. The fast-unfolding coronavirus pandemic was rippling through global markets in dangerous ways.Trading in Treasurys — the government securities that are considered among the safest assets in the world, and the bedrock of the entire bond market — had become disjointed as panicked investors tried to sell everything they owned to raise cash. Buyers were scarce. The Treasury market had never broken down so badly, even in the depths of the 2008 financial crisis.The Fed called an emergency meeting on March 15, a Sunday. Lorie Logan, who oversees the Federal …

Read More

Posted on

Investors Are Focused on Treasurys. Here’s What the Fed Could Do.

Longer-term interest rates have jumped in recent weeks, a move that has been broadly interpreted as a sign that investors are betting higher growth and slightly faster inflation may be right around the corner.Federal Reserve officials have mostly brushed off the increase to date, saying it is a signal of economic optimism. But many investors have wondered whether the central bank might feel a need to intervene. The adjustment has at times roiled stock markets, which tend to sink when interest rates increase, and it could weigh on consumer spending and growth if it is sustained and borrowing becomes …

Read More

Posted on

Why Market Investors Are Now Troubled by Signs of Surging Growth

Investors had no trouble gliding past the death and economic devastation wrought by the pandemic last year to drive the market to record highs. An increasingly healthy economy is what’s making them panic.In recent days, the S&P 500 stock index has wobbled, suffering its worst weekly performance in a month last week, before rising on Monday, only to dip again on Tuesday and fall 1.3 percent on Wednesday. The bond market, too, is showing anxiety, with yields rising sharply as returns in the market for Treasury bonds have fallen roughly 3 percent this year.The market conniptions are a direct …

Read More

Posted on

Private Equity Firms Are Piling On Debt to Pay Dividends

Part of her legislative agenda remains holding the private equity industry “accountable for what happens with their target companies,” she said in a statement late last month when asked about the Apria deal.The dividend recap carried out by Apria was by no means the largest of 2020. Epicor Software, a company that was backed by the KKR investment group, completed a $1.9 billion deal, and Radiate Holdco, a TPG Capital-owned company, did a $2.6 billion deal, according to S&P Global Market Intelligence.And not all borrowing necessarily went to dividends. The loans can also be used to restructure debt, and portfolio …

Read More

Posted on

Europe’s Pandemic Debt Is Dizzying. Who Will Pay?

PARIS — For nearly six months, Philippe Boreal and 120 of his fellow workers have been paid to stay home from their jobs at a Cannes luxury hotel that was forced to close for the pandemic.Mr. Boreal, a janitor for 20 years, is grateful for the aid, which is bankrolled by the French government under a sweeping plan to rescue people and businesses from economic calamity. But as the Covid-19 crisis drags on, he wonders how long the largess can last.“At some point you ask yourself, ‘How are we going to pay for all this?’” asked Mr. Boreal, who is collecting …

Read More

Posted on

How the Stock Market’s Relentless Rise Saved Companies

Companies hit hard by the downturn also opted to issue bonds to raise cash last year — a record $2.28 trillion, 60 percent more than in 2019, according to figures from the Securities Industry and Financial Markets Association. This was an attractive solution after the Fed cut rates and even began buying up corporate bonds itself to steady the market.But issuing stock has its own appeal. For one, it’s not debt that needs to be paid back. Over all, companies issued $342 billion of stock last year, 76 percent more than in 2019. Initial public offerings brought in $85 billion of that sum, which means that …

Read More

Posted on

10 Challenges Biden Faces in Righting the Economy

All presidents come into office vowing to rapidly put into effect an ambitious agenda. But for Joseph R. Biden Jr., the raging coronavirus pandemic and the economic pain it is causing mean many things must get done quickly if he wants to get the economy going. In a speech Thursday on his $1.9 trillion spending proposal, Mr. Biden repeatedly stressed the need to act “now.”But piecing together a majority in Congress could take time: Compromises and concessions will be needed to get the votes he will need to advance legislation.The new president is expected to reverse many of Donald …

Read More

Posted on

With Vaccines and Stimulus on the Way, Banks Brighten Their Outlook

The results showed that JPMorgan’s retail customers have been buying houses and cars. The number of mortgages and auto loans rose 20 percent compared with a year earlier. The bank’s profit from stock trading jumped 32 percent, while earnings from trading in bonds, currencies, commodities and other products rose 15 percent from the same period a year earlier.Citigroup said on Friday that it had released nearly $1.5 billion from its reserves, but it was not enough to raise its quarterly earnings above what it earned in the same period in 2019. The bank reported a profit of $4.6 billion on revenue of $16.5 billion. …

Read More

Posted on

The Year the Fed Changed Forever

WASHINGTON — As Jerome H. Powell, the Federal Reserve chair, rang in 2020 in Florida, where he was celebrating his son’s wedding, his work life seemed to be entering a period of relative calm. President Trump’s public attacks on the central bank had eased up after 18 months of steady criticism, and the trade war with China seemed to be cooling, brightening the outlook for markets and the economy.Yet the earliest signs of a new — and far more dangerous — crisis were surfacing some 8,000 miles away. The novel coronavirus had been detected in Wuhan, China. Mr. Powell and his colleagues were …

Read More