Investec's Stopford Says Bond Market Term Premium Likely to Rise

The video discusses the concept of term premium in the US bond market, highlighting how markets are pricing in Federal Reserve actions but not fully accounting for supply-demand issues. Factors like additional supply, QE tapering, and market volatility are expected to raise term premiums. The potential impact on equities is considered, noting that equity markets can still rise in a rising rate environment unless the rate increase is sharp. The video also covers the pressure on short-term rates due to the Fed's interest rate hikes and the US focusing its supply on short-dated bonds.

What is the main issue with how markets are currently pricing in the Federal Reserve's actions?

• They are overestimating the impact of supply and demand.

• They are not considering the supply and demand issue enough.

• They are ignoring the Federal Reserve's actions completely.

• They are focusing too much on international markets.

Which factor is NOT mentioned as a cause for the rise in term premium?

• Additional supply

• Federal Reserve's actions

• Higher market volatility

• Increased consumer spending

How can equity markets react in a rising rate environment?

• They typically decline sharply.

• They remain unaffected.

• They can still rise depending on the extent of the rate increase.

• They always experience high volatility.

What is causing pressure on very short-term rates?

• A decrease in market volatility

• The US focusing its supply on long-term bonds

• The Federal Reserve's process of raising interest rates

• The Federal Reserve's decision to lower interest rates

Why is it not surprising that bill yields are rising?

• Due to a decrease in demand for short-term bonds

• Because of the large amount of paper coming to the market

• Due to the Federal Reserve lowering interest rates

• Because there is a decrease in bond supply