“The jump in yields – the realization of the horror scenario of bond investors” – the capital market

Amir Kahanovitz, chief economist at Excellence Investment House, refers to a 10-year yield increase in the US, after crossing the round 1%, for the first time since April. Kahanovitz notes that the market embodies a question will continue to rise to 1.2% by the end of the year. US investment banks also forecast levels of 1.5% or higher.

“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 industries, Finance and energy, measures with local inflationary implications, which are also causing a relatively faster increase 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 could at any moment, according to the Bank of Israel, reach a level whose cooling effect on the economy will be non-linear, forcing the Bank of Israel to deepen monetary expansion.” .

“Similarly, investors continue to prefer the purchase of indexed bonds, in Israel at negative returns, when they are once again convinced that Otto inflation is coming. In the last decade, similar expectations have been dispelled for the vast majority of the time, leaving bondholders tight with low and even negative returns. ”

Kahanovitz also notes the protocol of the Fed’s decision, which included reference to vaccines, when the Fed estimates that the impact of vaccines on the economy will be positive “in the medium term.” That is, probably trying to signal that the vaccine will not convince them to raise interest rates either.

Regarding the employment market in the United States, Kahanovitz notes: “ADP indications were published yesterday regarding the employment data to be published tomorrow, and these showed a surprising decrease in the number of jobs (123,000) compared to the expected increase of 75,000. If in the past such a negative surprise would have shaken the market, this time it managed to be swallowed up among other developments, including ISM’s very strong purchasing managers survey, published yesterday, high volatility in employment data themselves, and as mentioned “the blue wave”.

In Israel – closures are leading to a cooling of housing prices
“Meanwhile, not only is the shekel strengthening and exerting deflationary forces in Israel, but the CBS also describes a cooling-off rate of rising rents, the largest and most trending component of the index. If that is not enough, Israel is entering a tight closure number three, when in the past we will mention that such closures have mainly led to a cooling of prices. ”

“The Bank of Israel estimates that each week a closure will damage the economy’s demand of NIS 3 billion. 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 to the scenario. The new mutations are fast. ”

On the more positive side, the CBS reported that the classic unemployment rate in Israel fell in the second half of December from 5.4% to 4.8% (people who define themselves as unemployed) and the rate of workers in the IDF fell from 6.6% to 5.6%. Although now, in the new closure, the unemployment and sickness rate will return to climb, but from the experience of previous closures the damage will be mostly temporary. It will be recalled that in our estimation, upon the expiration of the restrictions on the economy and at the end of the payment of the Knesset grants, the percentage of Khalat workers (because of Corona) is likely to have dropped to zero. ”