ETF Securities Research Blog

Is dovishness dead at the Fed?

Economists are notorious for sitting on the fence and Federal Reserve (Fed) Chair Yellen is no different: her latest speech spent part of the time focussing on the possibility that the Fed underestimated the weakness of the price and labour market dynamics and the other part highlighting that policy shouldn’t move too slowly to offset potential inflation pressure. However, the more hawkish tone of Chair Yellen’s comments underpinned a rise in bond yields and the US Dollar (USD): two trends which we expect to continue.

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Deflating the ECB’s bond ‘balloon’

European bond yields are hovering near the lowest levels in history, but we believe it is not a bubble in the traditional sense. Yields are artificially low, driven by extraordinary levels of stimulus from the ECB. In this framework, we would characterise the situation as a bond balloon, not a bond bubble. Read more…