Visser says rising bond yields are noise for stocks
Jordi Visser of 22V Research said rising Treasury yields may be “noise” for stocks, arguing bond volatility, credit spreads and inflation expectations do not signal a bond crisis.
246%, a few basis points below the 19-year high it set in August. Traders are pricing roughly 60% odds that the Federal Reserve raises rates at its Sept. 15-16 meeting, after August payrolls came in at 162,000 against a consensus near 55,000. 5% on the 10-year possible.
He said the issue is what the rest of the market is doing while the yield chart climbs and which variable actually sets the earnings power of the companies driving the index. Bond volatility is subdued. The ICE BofA MOVE index, which measures how much price movement options traders expect in Treasury futures, sat near 73 as of Friday, far below the readings seen in 2020 and 2023. He said a bond market pricing a crisis does not price its own volatility that cheaply.
Credit is quieter still. 65 percentage points on Sept. 3. Visser said that is among the tightest levels on record, and that a market bracing for a debt crisis would not price risk that way.
Inflation expectations are showing a similar pattern. 5%, almost exactly on top of core consumer inflation, while the daily Truflation reading has been falling. The damage is also smaller than the yield chart suggests. Visser said long-dated Treasuries — tracked by the iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) — are down roughly 5%, versus 32% in 2022, when the bond move actually mattered.
Corporate America still looks stronger than rates appear to imply. 7% year over year, or roughly 25% excluding mark-to-market gains. 9% in the fourth. 75 per share last week.
This is why rising yields have not yet produced the equity damage some investors expected. ” He said a 200 basis point rise in the 10-year yield, from 5% to 7%, would cost the large model developers about one percentage point of margin. He also said a 10% cut in model pricing would cost three. Visser said the three companies that set the outcome are Anthropic, OpenAI and Nvidia Corp.
(NASDAQ: NVDA), and that the risk to watch is price compression on models, which is not happening. 6% of its 52-week high. Dell Technologies Inc. (NYSE: DELL) jumped 9% after telling investors AI server revenue should triple, up from a doubling six months ago.
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