Good news or bad news?
Falling yields, weak data
By Buttonwood
BOND yields are falling. This is great for Italy and Spain where the cost of borrowing is its lowest since late 2010. But it's a bit less encouraging that German 10-year yields are down 16 basis points over the last month or that US Treasury bond yields are down 24 bp. That hardly suggests investors think that the economy is returning to normal.
It would hardly be surprising if investors had a feeling of deja vu, as the global economy flatters to deceive. World trade volume is only up around 2% over the past year. The Chinese purchasing managers' index for manufacturing was only just over 50. The composite euro zone PMI, also out today, was flat at 46.5, indicating shrinking activity; most worryingly, the German manufacturing indicator dropped from 49 to 47.9. Some think that German exporters are being squeezed by the Japanese as the latter take advantage of the weak yen. The US Markit PMI fell to 52, better than most but disappointing, especially as there was a sharpish fall in new orders.
More from Buttonwood’s notebook
So long, farewell
Three worries and three signs of hope in the final blog post
The flaws of finance
The sector is essential to the economy. But it is rewarded too highly and imposes wider social costs. The penultimate in a series of farewell blogs
Hope I save before I get old
Although we will probably spend 20 years or more in retirement, we don't think about it enough. The third in a series of farewell blogs