(Bloomberg) – Be prepared for a summer of uncertainty, where treasures are required and the yen is becoming increasingly expansive as US President Donald Trump makes tariffs for his favorite foreign policy tools.
Trump's unexpected decision to levy tax on imports of Mexican foods supports renewed doubts about the possibility of a US-China trade agreement. While strategies have this week posted a number of reasons why three-year 10-year returns should fall to 2% and the yen to strengthen, some fund managers now demand an even stronger rally in port assets.
"If it was someone who still believed it could be a short-term resolution with China, now has gone out of the window," said Prashant Newnaha, senior interest strategist at TD Securities Inc. in Singapore. "This whole trade war prospect is going to be much longer. From a direct perspective you will buy treasures. "
Trump's unexpected tweet late on Thursday about imposing tariffs on Mexico ratcheted up the concern about global trade frictions that have already dragged on nations as diverse as South Korea, Japan and Canada, as well as the EU. threatened to pay taxes on auto imports, and only this week says he does not see an agreement with China happening soon.
Market orientation and concern for slowing global growth will lead to even greater bets on the Treasury, pushing the US 10 annual yield down to 1.5%, according to Akira Takei, a global asset fund manager at Asset Management One in Tokyo.
Takei, who once called himself "the most bullish financial investor in Japan," said he was buying US government bonds matured in five to Ten years when he plays the market will appreciate in a higher likelihood that the Federal Reserve will cut interest rates. The dividend would have fallen even without the US and China trade war because the US hiking through December has tightened economic conditions and damaged the economy, he said.
Mexico tariffs make China-U.S. Deal Less Likely, Analysts Say
Falling Four Base Points Friday to 2.17% Having Affected the Lowest since September 2017. It rose 0.6% to 108.96 per dollar and expands its biggest monthly gain in year. Mexico has gone as much as 2.5%.
Yenet can strengthen to 105 per dollar at year-end, a gain of about 4% from today's level, according to Damien Loh, chief investment in hedge fund Ensemble Capital in Singapore. Treasury dividends are likely to fall below 2% by the end of the year, he said.
"The Mexico news came as a surprise to everyone," Loh said. "It's really a single person – Trump – who is running everything at the moment."
Trump said he would charge tariffs of up to 25% on Mexican goods to the country stopping the move in the US by illegal immigrants. It surprised traders given that Mexico has agreed on a new North American trade pact. Excitement also increased higher after China reported that it was said to have a plan to limit rare earth exports to the United States
Barter markets are pricing in three Fed price fluctuations by the end of 2020. Bonds have rallied around the world this week, with returns on 10-year securities in Australia and New Zealand falling to records, while the corresponding German bases are within a few points.
The spread between three months and 10 The annual return – taken as an indicator of a future recession – was most inverted since 2007 this week, suggesting that more investors are expecting an economic contraction in the world's largest economy. Treasury 10-year returns of 1.50% will be the lowest since 2016.
"There is no longer a war on commerce, the charges are now being used as a weapon for many different problems he has with different countries," said Janu Chan, senior economist at St. George Bank in Sydney. "It affects businesses, business understanding. It is very damaging to the global economy as it goes about it"