Real yields, Taiwanese trade and Bitcoin’s rally
This week's chart covers the following topics:
Different eras for US real yields
This chart can be applied to different countries using Macrobond’s change region functionality.
As price increases slow and central banks raise interest rates, it’s interesting to see how US 10-year yields have fluctuated when adjusted for inflation.
This chart breaks down the evolution of real US 10-year yields by creating an average for each decade. The real yield peaked in the early 1980s, when Federal Reserve Chairman Paul Volcker was famously engaged in sharp rate hikes to bring down inflation that was even higher than it was 2022-23.
As we can see in the 1970s, bonds were a bad bet; inflation largely wiped out your yields. By contrast, investors who bet that Volcker would succeed in his quest were rewarded handsomely. The average post-inflation return was 5 percent in the 1980s – making it the best decade.
Factoring in Fed hikes (or cuts) after next week’s likely pause
Fed policy makers convene next week, and the market consensus calls for them to stand pat on interest rates.
This table peers into 2024 by using the implied probabilities for rate levels predicted in the Fed funds futures market.
Will Jay Powell announce one more hike before the end of the year? The market is pricing in a 29 percent chance of this outcome.
As this chart shows, the chance of two more rate hikes over the next year (which would bring the key policy rate to a 5.75- 6 percent range) is viewed as unlikely, though not impossible.
Taiwan’s semiconductors boost the trade surplus to a historic high
Amid perennial geopolitical tensions and a wobbling global economy, Taiwan can always count on demand for its high-end semiconductors.
Taiwan Semiconductor Manufacturing (TSMC), whose customers include Apple and Nvidia, recently reported better-than-expected third-quarter figures. While the company had been navigating one of the chip industry’s cyclical downturns, analysts said TSMC is poised for another leg of growth amid demand for AI chips.
This chart aims to show the outsized effect of the semiconductor industry on Taiwan’s trade balance – which recently touched a historic surplus. The chip industry is included in the “machinery & transport equipment” segment. All other sectors (in purple) are experiencing a trade deficit.
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Check out our latest data additions.
Can’t get enough charts? Usama Karatella and Meghna Shah take you through the newest time series added to the Macrobond universe. They highlight data showing:
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