trending Market Intelligence /marketintelligence/en/news-insights/trending/LjKoFwUpypSsV04rxzRgmg2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Global long-term rates holding onto postelection surge

China COVID-19 Trends In TV, Video

Essential Metals & Mining Insights - August 2020

Street Talk Episode 68 - As many investors zig away from bank stocks, 2 vets in the space zag toward them

US Broadband Households Shift Into Higher Gear In H1'20, 1-Gig Adoption Soars


Global long-term rates holding onto postelection surge

Many long-term rates around the world continue to move higher, building on the sharp increases witnessed in the aftermath of the U.S. presidential election.

The yields on 10-year sovereign bonds rose in 12 of the 15 largest global economies in January. Only Brazil, India and Russia saw the yields on their 10-year bonds decline between year-end 2016 and Jan. 27.

During the same period, long-term rates rose in three of the four largest economies in the Americas and posted even larger increases in Europe. With the exception of Russia, the yields on 10-year bonds in Europe rose by at least 20 basis points in January.

The increases in long-term rates in recent weeks, in most cases, added to the surge in global bond yields sustained after Donald Trump's surprise victory in the U.S. presidential election. In the month following the election, the yields on 10-year sovereign bonds rose in 14 of the 15 largest economies in the world.

SNL Image

SNL Image

Long-term rates climbed as some market observers believed Trump's policies would increase the deficit by boosting infrastructure spending while cutting taxes. Long-term rates also went higher as some other observers expected stronger economic growth to come from proposed fiscal stimulus and talks of a more business-friendly environment in the U.S.

The Federal Reserve offered some support for that thinking as well, with its Federal Open Market Committee opting in December 2016 to raise the federal funds rate for the first time in almost a year. Not long after that, several members of the FOMC said they believed a stronger economy and the prospect of higher fiscal spending would prompt a more aggressive rate hike stance in 2017. Still, the Fed decided to hold the fed funds rate unchanged during its first meeting in 2017 and failed to offer much insight into future policy actions.

Financial institutions have waited some time for interest rates to move higher. While increases in long-term rates likely will serve as a headwind to mortgage banking income due to slower mortgage refinancing activity, higher rates offer a wide array of financial institutions opportunities to reinvest cash flows at more attractive yields in the bond market. Banks also likely will see higher yields on newly originated loans and should see yields on variable-rate loans move higher.

SNL Image

A number of those loans are tied to benchmark rates like U.S. dollar LIBOR, which has jumped over the last six months. Three-month, U.S. Dollar LIBOR began rising in the summer of 2016 ahead of planned money market reform in mid-October. That regulation required prime institutional money market funds' net asset values to float, and for both prime institutional and retail funds to impose gates and liquidity fees during periods of extreme volatility.

The rule change has spurred significant outflows in prime money market funds. Since July 2016, data provided by the Investment Company Institute shows that more than $600 billion has left prime funds, while nearly $630 billion has moved into government money market funds, pushing LIBOR higher. During that period, three-month U.S. dollar LIBOR has risen close to 35 basis points, or beyond the rate hike by the Federal Reserve in December.

The increase in LIBOR helped drive loan yields higher for a number of banks in the fourth quarter of 2016 even though the fed funds rate remained unchanged for much of the period. The continued increase in LIBOR prompted some banks to offer a more positive outlook for net interest income in the coming year, even if the Federal Reserve does not take further actions. For instance, banks like Bank of America Corp. and Hancock Holding Co. see important metrics like interest income and net interest margins rising, even without further rate increases by the Fed.

Just how high rates will go remains unclear. The futures market projects a 56% probability that the Fed will raise rates two or three times in 2017, lifting the fed funds target range to as high as 125 to 150 basis points by December 2017. Meanwhile, long-term rates in a few of the world largest economies, including the U.S., have declined from the recent highs sustained in mid-December. The modest rally in several key long-term rates suggests that global investors still have some money sitting on the sidelines, waiting to take advantage of higher yields should they come to pass.

SNL Image