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What is behind the rise of global bond yields?

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Fixed Income Research  - What is behind the rise of global bond yields? The rise of US yields is driving up yields around the world.

Fixed Income Research  – What is behind the rise of global bond yields?

Highlights

  • The rise of US yields is driving up yields around the world.
  • We expect higher volatility in global rates, amplified by geopolitical risks and commodity price movements.
  • Structural headwinds and accommodative foreign monetary policies will likely limit the rise US yields over the medium term.

Since last November, investors’ sentiment has turned into ‘risk-on’ mode, favouring risky assets and equities relative to bonds. The rise in global yields and the steepening of yield curves has fuelled fears about the end of the 35-year bond bull market.

US yields drive up global yields

Since the early 2000s, the rise of global financial integration (i.e. the increase movements of capital between economies) has been reflected in higher co-movement in global yields. The chart below shows that almost 60% of the changes in bond yields of advanced economies (US, UK, Germany, and Japan) may be explained by a common factor.
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The recent rise of global yields was predominantly driven by the rise of US yields along with cyclical factors (such as inflation, geopolitical risk and market volatility). However, we believe the ongoing accommodative monetary policies in Europe and Japan are likely to keep bond yields low in these regions, limiting the rise of US yields over the medium term.

What is driving US yields higher?

Long-term bonds yields are a function of the expected future short-term interest rates and the bond term premium that investors require to buy long-term bonds rather than roll over a series of shorter maturity bonds (i.e. inflation risk premium). The trend decline in global yields in the past 35 years mostly reflects the trend decline in bond term premium, while expected short-term interest rates fluctuate along with the changes in monetary policies.

Expected short-term rates started to increase in December 2013 when the Fed announced the tapering of its monthly bond purchases. However, US bond term premiums continued to decline and then slipped into negative territory in the first half of 2016 – for the first time in history. Deflation fears fuelled by the 70% drop of energy prices between 2014 and 2015 negatively affected inflation risk premiums, which declined from 0.5% to -0.5%. The sustained rebound in energy prices since February 2016 enabled inflation premiums to bounce back in Q4 2016, leaving both forces – bond term premium and expected short-term rates – trending upward. As a result, US long-term yields started to rise.

We evaluate the current mispricing of the 10yr treasury yield at 10bps tighter than its estimated value, based on the gap between the current 10yr yields and the sum of its two components. Thus, we believe most of the expected three rate hikes from the Fed this year have already been priced into 10yr yields. However, we expect higher rates volatility amplified by elevated volatility in energy prices and geopolitical risks. The MOVE index (an indicator of bond markets volatility) has increased 20% since Q4 2016.

Structural headwinds push yields down

The recent tightening in US financial conditions has been driven by the prospect of a better economic outlook in the US, reflecting current expectations of larger fiscal policy stimulus. In our opinion, the efficiency of the fiscal stimulus and its effects on bond markets will crucially depend on its fiscal neutrality and on its capacity to boost productivity and labour force growth. While the labour force growth has rebounded since 2012 under the accommodative monetary policy of the Fed, US productivity growth remain low from an historical perspective and continue to weigh on the economy.

Historical data reveals a strong positive relationship between investment and labour productivity.

The decline trend of investment in advanced economies can be partly explained by high credit constraints. The Debt Service Ratio (DSR) or the share of income used to service debt has not yet return to the pre-crisis levels, weighing on consumption and investment.

Subdued long-term economic trend limit yields’ rise

The gradual decline in the US GDP growth trend has led to gradual similar decline in the neutral real interest rate (i.e. the federal funds rate that neither stimulates nor restrains economic growth), which, in turn, has caused the decline in long-term interest rates. The US Congressional Budget Office (CBO) forecasts a stable 2% potential real GDP growth – the highest level of real GDP that can be sustained over the long term – for the US economy over the next 10 years. Accordingly, the neutral real interest rate for the US is expected to pick up and move in tandem with the potential real GDP. Although, both remain lower from a historical perspective.

This analysis is consistent with the gradual downward revision of long-run projections from the FOMC. From 2012 to today, the FOMC gradually revised downward its estimates for the long-run potential GDP growth rate and the terminal fed funds rate (or neutral interest rate) from 2.4% to 1.8% and from 4.25% to 3.00% respectively. Fed Chair Yellen reiterated in January1 that the Fed expects to increase Federal Funds rate target a few times a year until, by end of 2019, it is close to its longer-run neutral rate of 3%. Accordingly, we expect the Fed to hike rates three times this year.

We expect the trend rise of the US yields to be gradual over the medium term toward 2019 amid higher volatility. The upside risks to this view would come from a significant and quicker-than-expected rebound in productivity growth and inflation.
For more information contact:

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com

Important Information

The analyses in the above tables are purely for information purposes. They do not reflect the performance of any ETF Securities’ products . The futures and roll returns are not necessarily investable.

General

This communication has been provided by ETF Securities (UK) Limited (“ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the “FCA”).

This communication is only targeted at qualified or professional investors

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Börshandlade fonder för den som vill investera i skogen

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Timmer och skogar är garanter för att mildra klimatförändringarna och en naturlig träkälla. Skogarna täcker stora landområden, utgör en oumbärlig åtgärd för att minska koldioxidutsläppen och är de främsta producenterna av syre. Det finns även börshandlade fonder för den som vill investera i skogen.

Timmer och skogar är garanter för att mildra klimatförändringarna och en naturlig träkälla. Skogarna täcker stora landområden, utgör en oumbärlig åtgärd för att minska koldioxidutsläppen och är de främsta producenterna av syre. Det finns även börshandlade fonder för den som vill investera i skogen.

Detta ger möjligheter för företag som äger skog eller är inblandade i skogsskötseln. Träförädlingsindustrin är också en del av denna trend, liksom börsnoterade skogsfonder i form av REITs (Real Estate Investment Trusts). Dessa företag kan användas för att skapa ett index.

I den här investeringsguiden hittar du alla ETFer som gör att du kan investera i skogen. För närvarande finns det ett index tillgängligt spårat av två olika ETFer som båda har en årlig förvaltningskostnad på 0,65 procent.

Skogs-ETFer i jämförelse

När man väljer en ETF för skogsbruk bör man överväga flera andra faktorer utöver metodiken för det underliggande indexet och prestanda för en ETF. För bättre jämförelse hittar du en lista över alla skogs-ETFer med detaljer om namn, kortnamn, kostnad, utdelningspolicy, hemvist och replikeringsmetod. För ytterligare information om respektive börshandlad fond klicka på kortnamnet för att ta del av allt vi skrivit om dessa.

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Global X Telemedicine & Digital Health UCITS ETF Dist GBP är en mycket liten ETF med tillgångar på 0 miljoner euro under förvaltning. Denna ETF lanserades den 17 december 2020 och har sin hemvist i Irland.

Skäl att överväga EDOG

Hög tillväxtpotential: Den globala telemedicinmarknaden ökade med 35 % från 2019 till 2020 och översteg 55 miljarder dollar. Prognoser tyder på att marknaden kan nå nästan 300 miljarder dollar år 2028 (Källa: ”Telemedicine Market Size, Share & Trends Analysis Report By Component” Grand View Research, februari 2021).

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Nya konsumentinställningar: Pandemin ökade antagandet av digitala hälsotjänster, med många vänder sig till telemedicin för första gången, vilket påskyndade temats räckvidd.

Handla EDOG ETF

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London Stock Exchange är en marknad som få svenska banker och nätmäklare erbjuder access till, men DEGIRO gör det.

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The Dogecoin story: The emerging “intrinsic value”

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Like Bitcoin, Dogecoin uses a proof-of-work (PoW) consensus mechanism but runs on its own blockchain, originally forked from Litecoin. It uses the Scrypt hashing algorithm, which is less resource-intensive than Bitcoin’s SHA-256, making mining more accessible to everyday users with consumer-grade hardware. Due to merged mining with Litecoin, Dogecoin benefits from shared infrastructure, with hashpower recently reaching all-time highs of 2.7 petahashes (quadrillion hashes) per second, making the network increasingly difficult to attack.

Like Bitcoin, Dogecoin uses a proof-of-work (PoW) consensus mechanism but runs on its own blockchain, originally forked from Litecoin. It uses the Scrypt hashing algorithm, which is less resource-intensive than Bitcoin’s SHA-256, making mining more accessible to everyday users with consumer-grade hardware. Due to merged mining with Litecoin, Dogecoin benefits from shared infrastructure, with hashpower recently reaching all-time highs of 2.7 petahashes (quadrillion hashes) per second, making the network increasingly difficult to attack.

Dogecoin’s design is built for speed and utility, has no maximum supply, and confirms blocks every minute (10x faster than Bitcoin). Moreover, it maintains ultra-low transaction fees, which is ideal for tipping, microtransactions, and everyday use.

More than a meme

Although its supply is technically unlimited, Dogecoin’s issuance model is clear and predictable. Approximately 10,000 DOGE are mined every minute, adding up to around 5.25 billion new tokens each year. As the supply base expands, this fixed issuance creates a natural disinflationary trend that has cut nearly in half over the past decade while ensuring network security through consistent miner rewards.

Dogecoin’s technology fosters an aligned ecosystem between users and miners. With sustainable economic incentives, it acts as a kind of “retail Bitcoin”, built not just for hoarding but for real-world use, too.

While Dogecoin began as a lighthearted experiment, its evolution has proven it to be far more than a meme. Thanks to its speed, low fees, and strong community backing, Dogecoin has grown into a functional digital currency with a range of real-world use cases. From payments and merchant adoption to infrastructure development and charitable giving, Dogecoin continues to demonstrate its staying power as a practical and accessible tool in the broader crypto ecosystem.

Dogecoin as a payment tool

Dogecoin has transformed into a widely accepted digital currency, embraced by major brands like Tesla, AMC, Newegg, and the Dallas Mavericks. With fast transaction speeds and low fees, even amid surging transaction volumes, it has become a practical option for everyday payments. Crypto payment processors like BitPay have further expanded its reach, enabling thousands of merchants worldwide to accept DOGE. Most recently, The Open House Group, a prominent Tokyo Stock Exchange-listed real estate firm, added Dogecoin to its supported list, making it one of the few digital assets accepted for property transactions.

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Meanwhile, RadioDoge is working to expand access by enabling offline transactions in remote regions through low-cost radio and Starlink technology, advancing global crypto inclusion. A rumored integration with Elon Musk’s X platform could extend Dogecoin’s utility across digital tipping and commerce. These efforts collectively reinforce Dogecoin’s growing relevance in real-world payments and its potential as a frictionless, decentralized transaction layer.

Do Only Good Every Day

As we’ve seen, community drives memecoins, and Dogecoin’s community shines the brightest. This global network not only thrives on memes but also channels that energy into social good. From funding clean water in Kenya to sending Jamaica’s Bobsled Team to the Olympics and raising over $1 million for Ukraine relief, DOGE’s community transforms internet culture into real-world impact. Low fees and fast transactions make it a favorite for grassroots giving, showing a coin born as a joke can leave a lasting legacy. Dogecoin is more than a digital asset—it’s a movement powered by a community that believes in doing good every day.

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.

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