HK Equity Fund Advise Fed Tapers But Watch Bond Yields

Rushing to the Chamber
unemployment fund
Image by European Parliament
MEPs will during the February plenary session debate how to boost employment, especially among the young, vote on a food aid scheme for European citizens in need, and discuss the situation in Syria. Other topics include EP priorities for the European Council on 1-2 March, the upcoming elections in Russia and political developments in Hungary. In addition there will be a debate with Italy’s Prime Minister Mario Monti on Wednesday at 1500h CET.

One of the main issues during the plenary from 13-16 February will be how to tackle youth unemployment, which has reached an unprecedented level in Europe due to the economic crisis. On Monday MEPs will ask the Commission about its plan to use up to €82 billion in EU structural funds not yet allocated to specific projects to help small firms and combat youth unemployment. The Parliament will also vote on three resolutions on Wednesday calling for more efforts on growth, employment and poverty.


© European Union 2012 EP/Pietro Naj-Oleari

Hong Kong’s HK Equity Fund say that despite financial market commentary suggesting that the US Federal Reserve has found a way to introduce the tapering of monetary stimulus without sending the markets into a selling frenzy, analysts at HK Equity Fund believe that the expected investor reaction will play out in slow motion.

The Fed announced last week that it plans to reduce the rate at which it buys US Treasuries and mortgage-backed securities by $ 10bn from $ 85bn per month to $ 75bn per month but also promised that, in contrast to a promise made earlier in the year, it would maintain ultra-low interest rates for considerable time even after the unemployment rate in the US falls to 6.5%.

“Markets had expected the Fed to postpone the taper until at least March of next year so the $ 10bn reduction came as something of a surprise. The threat of the taper had largely been priced into the equity markets but although 10yr bond yields initially remained benign, in the days following the announcement, they’ve started tracking uncomfortably close to the psychological 3% mark that sparked a sharp stock market sell off last September when investors were certain the taper was imminent” said the HK Equity Fund analyst.

Investors have greeted the taper with less of a kneejerk reaction but HK Equity Fund believes that markets will continue to adjust the price of risk of holding US treasuries by pushing yields higher. “The US government can’t expect to be able to borrow money cheaply ad infinitum. All the largesse of the last 20 years has to be paid for,” concluded the analyst.

About HK Equity Fund
HK Equity Fund established a presence in Hong Kong in 1995. Today their Hong Kong office is their main hub in the Asia-Pacific region. All of HK Equity Fund’s business groups have operations in the city, making this their largest office in the region outside Australia. From Hong Kong they offer corporate finance and advisory, institutional cash equities and research, equity derivatives and structured products, debt financing and funds management, and environmental financial products, futures, metals OTC hedging and fixed income trading services.

For more info contact:
HK Equity Fund Limited
28/F, 8 Wyndham Street,
Hong Kong
Email Address: info@hkequityfund.com

Related Unemployment Fund Articles

Leave a Reply

Your email address will not be published. Required fields are marked *