Business
The "blue wave" is here.
What does this say about the markets?
The 2020 bond investors' horror scenario has come true, and Democrats will be able to raise taxes, install regulations and more. Will this really happen and what is happening in the local sector? Amir Kahanovitz, chief economist at Excellence Investment House, with the analysis
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Joe Biden
Amir Kahanovich
Thursday, 07 January 2021, 11:16
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The 10-year yield in the US crossed the 1% round yesterday, for the first time since April, and the market embodies a question that will continue to rise to 1.2% by the end of the year. Some US investment banks also forecast levels of 1.5% and above.
The jump in yields came after the realization of the horror scenario of bond investors from 2020 - "Blue Wave" in the US, in which Democrats remember gaining power that will allow them to pour trillions more dollars on the economy, raise taxes and minimum wage, install regulations in technology, finance And energy, measures with local inflationary implications, which are also causing relatively faster growth in imports, which is hurting the dollar.
Still, it is worth remembering that the implied interest rate hikes do not mean that interest rates will rise, especially not in Israel, where the continued strengthening of the shekel may at any moment, according to the Bank of Israel, reach a level whose cooling effect on the economy will be non-linear.
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Similarly, investors continue to prefer buying index-linked bonds, in Israel at negative yields, once again convinced that Otto inflation is coming.
Meanwhile, not only is the shekel strengthening and exerting deflationary forces in Israel, but the CBS is also describing a cooling rate of rent increases, the largest and most trending component of the index. If that is not enough, Israel is entering tight close number three tonight, as we mentioned earlier. The Bank of Israel estimated yesterday that each week a closure would damage the economy by NIS 3 billion in demand.
In the background, too, optimism about vaccines is beginning to wane, in light of reports that the stock of available vaccines is dwindling, adding another element of uncertainty. Wednesday, in light of the rapid spread of the new mutations. The
protocol of the Fed's decision published yesterday included a reference to vaccines, with the Fed's assessment that the effect of vaccines on the economy will be positive in the 'medium term.
' Excellence Investment House
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