The 10-year Treasury yield has been hovering between 2.8% and 3.0% for months, but finally closed at 3% on May 9, 2018. Since then, the benchmark rate has fallen slightly, though it remains in a tight range around the 3% level. So what does a 3% yield mean for markets? A round number like 3% can be psychologically important for markets, and does represent a more attractive yield for high-quality bond investors than they may be used to. However, it is also important to keep in mind that the impact of such a move, for both investors and borrowers alike, is limited, given that a 3% yield isn’t markedly different from the 2.8 – 3.0% r

First quarter earnings season was excellent by almost any measure. The numbers were strong even without the boost from the new tax law. In this week’s commentary, we recap the outstanding near-complete first quarter earnings season, highlight some of the key themes, and show why a potential peak in earnings growth is not cause for immediate concern.

Great Numbers

We expected a strong first quarter earnings season and we got it. Growth was very impressive, with S&P 500 Index earnings growing 26% year over year, the best since the fourth quarter of 2010. Even when excluding the impact of the new tax law (estimated at 6

Last June, oil hit an interim low of about $42.50 and started to climb. By May 7, 2018, it had crossed $70 for the first time since 2014. President Trump announced the U.S. would be withdrawing from the Iran nuclear deal the next day. We view rising oil prices as largely a result of rebalancing supply and demand, and believe prices will stabilize as markets digest the recent news. The Organization of the Petroleum Exporting Countries (OPEC), its partners, and U.S. production growth should be able to compensate for reduced Iranian supply. Even if prices stabilize at current levels, it will be a modest hit for consumers, especially those at low

The threat of China liquidating Treasuries as a bargaining chip in trade negotiations remains a possible scenario, but in our view a highly improbable one. As the saying goes, “If you owe a bank $100, you have a problem. But if you owe a bank $1,000,000,000, the bank has a problem.” China owns a large amount of U.S. Treasuries ($1.2 trillion, to be precise) [Figure 1]. The most recent data from the U.S. Treasury indicate that China actually increased its holdings during February. More updated data will be available next week, which could give investors more insight into China’s intentions.

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