GREY:XEBEQ - Post by User
Post by
tamaracktopon Feb 26, 2021 7:30am
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Post# 32668813
Basic economics
Basic economics Overnight, all of the index futures tracked the movements of the 10-year yield. The rise in interest rates itself isn't surprising, it's the speed they have shot higher that's surprising. Rates are already up half a percent this year. The bond market is reacting to an expectation of an improving economy as GDP forecasts rise.
The markets are discounting a return to a semblance of normalcy, and have been favoring stocks that will benefit from the reopening, such as travel and dining, etc. Energy is up 7% in the last week. As GDP forecasts rise, so do corporate earnings. Certainly, rising rates aren't all bad. Granted, the 10-year yield is a benchmark for mortgages and auto loans, and obviously reduces the discounted value of future cash flows, but we have to keep in mind why these rates are rising.
Surely no-one expected rates to stay below 1% forever.