After the Columbus Day holiday, trade on the bond market will resume on Tuesday. Recently, the U.S. Treasury market has been as lost as the Italian explorer who was trying to find India. Over the last month, the 10-year yield TMUBMUSD10Y 4.078% has gone back up nearly 50 basis points.
Most of the rise in Treasury yields is due to better-than-expected economic reports from the U.S. The unemployment rate has been going down while inflation has been stubbornly high. The race could also play a role.
When he’s not writing a 39-minute deejay set, former President Donald Trump has proposed a “yuge” list of tax cuts, such as not taxing tips as income and lowering the corporate tax rate to 15% for domestic manufacturing. The Tax Foundation says these cuts could cost as much as $6 trillion over ten years. The Committee for a Responsible Federal Budget says that Vice President Kamala Harris has a bunch of tax and spending plans that could cost $3.5 trillion over ten years.
Experts Jason DeSena Trennert and Ryan Grabinski from the big bank Strategas say that 117 of the 500 biggest companies in the United States have a lower credit-default swap spread than the government. A credit-default swap is a bet on how likely it is that an issuer will not pay its debts. A bigger number means a higher risk.
“A strong gold price is one sign that investors don’t trust either party to control spending. A look at the credit default swaps market can also teach us something,” they say.
Without taking into account the fact that no company would be safe if the U.S. government stopped paying its bills, this group of 117 does stand for good quality.
Strategas experts say that when prices went up in 2022 and 2023, the 50 S&P 500 companies with the lowest credit-default swaps did better than the market as a whole. Ingersoll Rand (IR) (1.67%), Berkshire Hathaway (BRK.B -0.05%), and Merck (MRK -0.04%) have all been in this group since then. It includes tech giants Apple (AAPL 1.65%), Microsoft (MSFT 0.68%), and Alphabet (GOOGL 1.05%), as well as drugmaker Merck (MRK -0.04%).
The September CPI figures could be the first sign that the wave of deflation has ended. If so, this group of stocks may once again do very well. They say that buyers might turn to these companies again if there is another wave of inflation.
The market
Stock index futures ES00 0.03% NQ00 -0.04% went down early Tuesday after the S&P 500 SPX 0.77% hit a new record high. After a report said Israel would not hit important Iranian energy assets, oil futures CL.1 -4.96% fell sharply.
| Key asset performance | Last | 5d | 1m | YTD | 1y |
| S&P 500 | 5859.85 | 2.88% | 4.03% | 22.85% | 33.98% |
| Nasdaq Composite | 18,502.69 | 3.23% | 5.18% | 23.26% | 36.37% |
| 10-year Treasury | 4.07 | 3.70 | 44.70 | 18.91 | -64.22 |
| Gold | 2669.7 | 0.29% | 2.29% | 28.86% | 38.12% |
| Oil | 69.87 | -9.60% | -0.89% | -2.05% | -19.73% |
| Data: BourseWatch. Treasury yields change expressed in basis points | |||||
