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Sovereign debt yields of zero and even negative is increasingly becoming the norm with between 25 percent and 35 percent of the world’s sovereign or individual country debt already negative, for the first time in history.

Ten-Year Treasury Yield of one percent now possibility

Low support for 10-Year Treasury Yield is leading to a possible downside of one percent or lower.

There is currently little support for 10-Yield Treasury Yield until the previous low made in 2016 is reached at 1.46 and given time further downside to 1.00 percent or lower now becomes a real possibility. The November 2018 high was 3.24 percent. 

10-Year U.S. Treasury Yield: August 9, 2019 close 1.74, down .12 on the week or 6.45 percent, Charts A1 to A4.

The U.S. Federal Reserve is on course to lower the Fed Rate, from today’s 2.25 percent, by possibly: First, another ¼ percent to ½ percent in September 2019; Second, another ¼ percent before the end 2019; and Third, likely another ½ percent or more in 2020. 

The “Trade Wars,” or the realignment of fiscal, monetary and trade policy between the U.S. and China, is the headline focus, but reality is our collective global trading partners are taking their sovereign debt (government debt) yields or interest rates lower. Sovereign debt yields of zero and even negative is increasingly becoming the norm with between 25 percent and 35 percent of the world’s sovereign or individual country debt already negative, for the first time in history. 

U.S. Dollar Index: The U.S. Dollar Index lost 0.54 percent the week of August 5, 2019, down 0.53 to close at 97.32. There are dollar bulls and bears each with strong well thought out convictions. One major argument for the dollar bears lies with the anticipated lowering of the Fed Rate at the September Federal Reserve FOMC meeting. Until that time the US Dollar is likely to move sideways, Charts A5 to A8.

A lower dollar would be supportive of current U.S. economic activity and global economies in general, especially those economies having dollar dominated debt. A lower dollar may also be supportive of a number of building global asset bubbles. 

Currency manipulation has and will continue to exist. It exists because global debts burden on global economic growth requires ongoing intervention by the World’s collective governments and central banks to maintain global economic momentum at a level that will sustain global growth and avoid a significant economic downturn. 

$WTIC Light Crude Oil: Prices Trading in a Range. August 9, 2019 close $54.50 per barrel, down $1.16 per barrel or 2.08 percent for the week. Present trading range $50.66 to $56.48 per barrel, Charts B6 to B9. Geopolitical uncertainties and political dynamics, coupled with possible supply disruptions make this market unpredictable for the world’s most talented analysts, so be highly respectful of price action. Do not try to outthink this market, just follow the price action. 

$CRB Index: Sideways with downside bias. August 9, 2019 close 172.09, down 1.26 on the week or 0.73 percent. This index needs to close above 183 to regain a bullish bias. The index remains extremely weak.   

The $CRB Index is weak for three reasons. First, global deflationary forces are limiting global growth and demand for commodities; Second, many of the world’s commodities remain surplus burdened; Third, the ongoing global realignment of the world’s currency, bond, equity, and commodity markets is presently limiting commodity demand by limiting global growth; therefore, there simply remain limitations to this index’s near term upside, unless oil prices regain an upward advance, Charts B1 to B5.

Rice, Soybeans, Corn, Wheat and Cotton Outlook: I will publish my market outlook for rice, grains and cotton after USDA releases their August 12, 2019 supply and demand estimates. 

U.S. and Global Equities: Most U.S. and global equity markets are facing some strong near-term headwinds and I need additional in-depth analysis this week before redefining their trading ranges.

No Crystal Ball

Since no one has a crystal ball or knows the future always consult an investment professional or professionals before making investment decisions. The world’s most talented speculators, investors and money managers are challenged by today’s global business environment.   

Robert Coats, Ph.D., Economist, Arkansas Department of Agriculture, 1 Natural Resources Drive, Little Rock, Arkansas robert.coats@agriculture.arkansas.gov | Farm Press Publications

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