Personal Finance

Why are the bonds plunging and what happened with the US cap limit?

  • Last Updated:
  • May 15th, 2014 7:25 pm
Tags:
None
Banned
May 7, 2014
188 posts
26 upvotes
Westmount, QC

Why are the bonds plunging and what happened with the US cap limit?

CAD 5Y bonds went down big time for the last two days. Why is this happening ?
What happened so the US debt limit? An year ago this was a big topic and the US government almost stopped working because the politicians could not agree on that

Can anybody explain what is going on with the above?
5 replies
Deal Fanatic
User avatar
Dec 14, 2010
7113 posts
9300 upvotes
Debt ceiling got extended.... Taper is doing its thing, that's why large caps are afloat / making new highs and small caps are being hit.

I believe large cap market price is fairly adjusted. We are not at the peak of the rally comparing to historical rallies (comparison here). But companies profits are flat and revenue growth is just above the inflation rate. At a forward P/E of 16, stocks are fully priced. Unless economic indicators improve, large caps might start correcting like the small caps.

Nevertheless, there are still solid companies that are still undervalued or fairly valued. Earnings and valuation drive long term return, regardless the noise. Like Buffet says, focus on the company.

Rod
Banned
May 7, 2014
188 posts
26 upvotes
Westmount, QC
Wasn't taper supposed to calm down the markets?
Right now the stock market seems to take a step back but yesterday it was fine although the bonds wend down
Something else is driving the bonds down since these went down when the stocks were going up and today again the bonds went lower and so did the stocks...
Deal Fanatic
User avatar
Dec 14, 2010
7113 posts
9300 upvotes
MindGamer wrote: Wasn't taper supposed to calm down the markets?
Right now the stock market seems to take a step back but yesterday it was fine although the bonds wend down
Something else is driving the bonds down since these went down when the stocks were going up and today again the bonds went lower and so did the stocks...
Support for SPY is around $184. It has to drop below that IMO to see further correction. No economic news in a week at least, so it shouldn't change much until there.

Rod
Banned
May 7, 2014
188 posts
26 upvotes
Westmount, QC
rodbarc wrote: Support for SPY is around $184. It has to drop below that IMO to see further correction. No economic news in a week at least, so it shouldn't change much until there.

Rod
China is in deep trouble and the resources chess war game is in full swing (Syria, Ukraine, Vietnam)
These are two potential sources of trouble
Deal Fanatic
User avatar
Dec 14, 2010
7113 posts
9300 upvotes
MindGamer wrote: China is in deep trouble and the resources chess war game is in full swing (Syria, Ukraine, Vietnam)
These are two potential sources of trouble
Yep, China can be the catalyst for a big correction if their condition deteriorates or fuel a higher rally if their condition improve.

I think markets don't care for Syria, Ukraine and Vietnam, market discounted on that already.

Rod

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)