FOMC, Trading, Treasury

Memories, Lessons & Future - US 10 year yields are climbing, will it continue?

April 22, 2018

Memories, Lessons & Future

As I was clearing up my study area at home, sorting through old files (real ring files not files on cloud) I was duly reminded of my age. Faded carbon copies, photos with poor resolution and tons of papers that I had to sieve, shed and archive, brought back fond memories and painful lessons.

2005 was the year I was out looking for a job, out from schools and dreamy days, and stepping straight into the real world. 

Just about 8 years earlier, in 1997, we experienced the Asian Financial Crisis. Although I was still in school, I was studiously following the many Central Banks lamenting their fight against the currency vultures on the newspapers (yes hard copies). On the personal note, I witnessed the devastating impacts on family and friends who shared stories of jobs losses, heavy financial losses and quite a few bankruptcies. It was both scary and unimaginable for myself, a student at a young tender age (many moons back).

And as we thought the economy was recovering in the early 2000s, SARS hit Asia. The Severe Acute Respiratory Syndrome which originated far beyond our shores spread within Asia. It not only took away many lives, it also took down the fragile economy with it. People were just too afraid of stepping out of the house, inevitably the economy spiraled down.

I started my career in the Finance industry as an assistant Dealer covering the Money Markets and Fixed Income. The charismatic Alan Greenspan was the Chairman of FED back then. And he was just embarking on his series of rate hikes - his final swansong before he passed the baton (or bomb) to Prof Bernanke in 2006. 

And in 2008, we experienced the Great Financial Crisis that sank markets all around the globe - whether you were Asian, European or American, everyone suffered the same horrific fate. US rates were slashed dramatically from 5.25% to 0.00% and an era of ZIRP (Zero Interest Rates Policy) implemented from FED to BOJ followed for many years.

In my opinion, I had the luxury of starting my career at an important juncture of modern times, a period of flux and uncertainty, and where  the age of internet was just beginning. 

US 10 year yields are climbing, will it continue?

Reminiscence aside, something dawned upon me - the US yields.

The recent events are just so similar. Markets were hit a decade or more ago, business sentiments were rocked and periods of uncertainty came and went. And then things got better, better and better.

The stock markets have recovered and hit new highs, the businesses are reporting record results, confidence indices are never better than before, and we are cheering at a sustained period of predictability in rates, politics and economics. This time is different!

Call me old school, call me anything but I think charts and trends do not lie. They are a mere reflection of market behavior - an aggregated index of collective human emotions.

Times are good, certainly very optimistic now. I have no crystal ball, neither am I privy to any great plans or grand conspiracies. I am just naturally wary and skeptical of things in the markets being bullish, optimistic and predictable for a long period of time.

I will be most happy if you can point me to anyone in the market who does not think that the FED will continue hiking in the next 12 months.

However, I will be most grateful if you could share with me your thoughts if this episode is definitely not another repeat of our previous experiences in the last 20 years or so.

I am still thinking if I should archive all these files on cloud. Will the net fail, not now but one fine day?

about author

Seng Ti is currently heading a Treasury & Finance team in a MNC and is serving as the President of the Association of Corporate Treasury (Singapore) aka ACTS. He enjoys reading and discussing about current affairs, politics, life, wine and lives a normal life with his wife and 2 young kids.