The European Super League has raised questions about how football clubs are funded and why they end up swimming in debt. Here’s what the experts say.

Super League
Soccer fans protest plans for a European Super League.

  • The ESL was set to be one of the most elite and wealthy breakaway football leagues ever.
  • Despite the league’s collapse, it’s triggered a fan-led review into clubs’ financial situations.
  • Two football finance experts told Insider how clubs earn money and why they get into so much debt.
  • See more stories on Insider’s business page.

The new European Super League (ESL) came crashing down recently after nine football clubs pulled out of the plans following huge backlash from fans, politicians, and players.

The 12 teams that were about to join the elite breakaway league would have been handed between 100 million to 350 million euros ($120 million to $420 million), the Financial Times first reported.

The ESL was also planning to receive $4.2 billion in debt financing from JPMorgan over a 23-year period, before the US investment bank said it “misjudged” the deal after the majority of the teams withdrew from the league within 48 hours.

Now, a fan-led review into English football will take place to assess clubs’ finance, ownership, and supporter involvement in the game.

But it begs the question: where does all this money come from in the world of football? Overall, there are three main sources of revenue: broadcasting, commercial, and matchday revenue.

TV broadcasting revenue

TV deals are one of the most important sources of income for football clubs. which can be sold domestically and internationally. Leagues, such as the highly popular English Premier League, own the television distribution rights of all their games.

TV channels bid for the rights to air the matches and the football leagues sells them to the highest bidder. For the Premier League, this happens every third season and is typically Sky Sports, BT Sports, and most recently, Amazon Prime.

Robert Wilson, football finance expert and lecturer at Sheffield Hallam University, told Insider that broadcast revenue typically makes up around 70% of the income of most Premier League clubs.

Although each club gets an equal share of the deal from the Premier League, they also receive merit payments – if they’re shown on TV more, they get paid more.

Wilson said that last year, Liverpool, who won the Premier League, earned around £150 million ($208 million) from the domestic TV rights deal, while Norwich City, who came last, earned around £110 million ($153 million). Relegation is therefore a costly and daunting prospects for clubs near the bottom of the league.

Read more: What Wall Street bankers really thought about JPMorgan’s $4.2 billion European Super League deal

The rights to show Premier League matches between 2019 and 2022 were sold for nearly £4.5 billion ($6.2 billion) in 2018, with Sky Sports getting hold of the majority of the games. This was a drop from £5.1 billion ($70 billion) in the 2016-2019 seasons.

Reports suggest that when broadcasters bid for 2022-2025 TV rights this summer, they won’t be prepared to spend as much as they did in previous years. Since BT Sports and Sky Sports agreed to a content-sharing deal in 2017, competition dropped between TV channels for the need to bid big, The Guardian reported in January.

“They were trying to produce – in my view – more football and the market was probably saturated,” Wilson said.

Commercial revenue

Another big money pot for football clubs is commercial revenue – in other words, income from sponsorship and merchandising, ranging from shirt sales, license holders, and retail outlets.

Big brands, such as Adidas, pay license fees to football clubs to stick the club’s logo on their shirts. As an example, Wilson said Adidas pays Liverpool a flat fee of £75 million ($10.4 million) to license the production of their replica jerseys.

“It doesn’t matter if they sell one shirt or a hundred million shirts, they still get £75 million,” Wilson said.

He also said the shirt sponsor, which is stuck on the front of the football shirt, is also a source of commercial revenue, as well as shirt-sleeve sponsors. Some of this revenue goes into the other parts of the club, such as the women’s club, he added.

The merchandising aspect of commercial revenue was hit hard during the COVID-19 pandemic because of the closure of shops, Dr. Nicolas Scelles, senior lecturer in sports management at Manchester Metropolitan University, told Insider.

“They can still sell online, but of course it affects the commerical revenue,” he said.

Matchday revenue

The final major source of income for clubs is the money they earn on the day of a match. This includes matchday sponsorship, the sponsor on the ball, and most importantly, tickets sales.

The expensive corporate boxes, which business people use to entertain clients in, contributes to the total income, as well as food and drink sales.

It’s important to note that matchday revenue varies depending on the size of the club stadium – a bigger stadium with more fans, such as Arsenal’s Emirates stadium, will generate more revenue on a match day.

Scelles said this type of revenue has been affected the most by COVID-19 considering that stadiums were forced to close for the majority of 2020.

Transfer fees can also be income, Scelles said, as well as club owners’ injecting in their own money, but these two factors aren’t consistent sources of revenue that keep every football club up and running.

So why do clubs end up drowning in debt?

Player transfer fees and players’ salaries are the two main things that football clubs spend their money on, and they’re not cheap, especially when there’s no cap on how much players earn.

The most expensive transfer fee so far was Neymar da Silva Santos Júnior who transferred from Barcelona FC to Paris Saint Germain (PSG) for £200 million ($277 million) in 2017.

Wilson said it’s not uncommon for a number of clubs to spend more than they earn, and many have 140% of expenditure to turnover. The expenditure usually gets underwritten by future revenues, he added.

“Because the TV deals and the sponsorship arrangements are multi-year, they’ve got some guaranteed future revenue. But then they tend to accrue large debts and that’s why we see frequent instances of ownership change,” Wilson said.

Ownership transition can happen when a club ends up in millions of dollars of debt and a new owner takes over from the previous one to inject more money into the club. But this starts the cycle all over again, Wilson said.

The piles of debt stem from the huge competition between the teams. They’re all fighting to win the most trophies, nab the best players and be the best in the league. As a result, they hike up players’ salaries and transfer fees.

This “winner takes all scenario” sets benchmarks for other clubs, Wilson said. For example, Neymar being transferred for £200 million lifted the entire ceiling for how much transfer fees should cost, he said.

Wilson believes football’s financial system isn’t sustainable. “These losses are almost accepted as part and parcel of the financial model,” he said. “There’s loopholes and grey areas,” he said.

The only reason why there’s a review into the finances after the European Super League is because the clubs involved are some of the biggest in the world and the logistics of the league sparked uproar from loyal fans, Wilson said.

From a business perspective, Scelles doesn’t think clubs being in debt is a bad thing as the money is being used to generate more revenue, develop the club, and extend it internationally. But he said there needs to better financial management in place, even though this is hard to regulate in football.

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Donald Trump is set to share a $617 million windfall with Vornado Realty Trust, due to a property refinancing deal, reports say

Protestors outside 555 California Street in San Francisco.
Protestors outside 555 California Street in San Francisco in 2017.

  • Vornado and Trump will get $617 million as part of a $1.2 billion bond sale, Bloomberg reported.
  • The payout is part of a refinancing deal for 555 California Street in San Francisco.
  • Trump is a 30% partner in 555 California and 1290 Avenue of the Americas in New York.
  • See more stories on Insider’s business page.

Former President Donald Trump may receive a multimillion payout from his minority ownership stake in a San Francisco property with Vornado Realty Trust, which on Friday sold $1.2 billion in bonds, according to Bloomberg.

The deal included a $617 million return for the partners, Bloomberg had previously reported. It was unclear how much would go directly to Trump.

The Trump Organization has about 30% ownership in office towers on both coasts through a partnership with Vornado. Together, they own 555 California Street in San Francisco and 1290 Avenue of the Americas in New York City.

As much as $800 million of Trump’s net worth is tied up in the buildings. Unlike other buildings owned outright by The Trump Organization, the ex-president doesn’t have control over the properties he owns with Vornado.

The money raised on Friday from bonds sales would be used to refinance loans and fund construction on their three-building 555 California property, according to Bloomberg.

Vornado is in the middle of a $66 million redevelopment project for both 555 California and 345 Montgomery Street, another of the buildings in the complex, according to a February filing with the Securities and Exchange Commission.

Built in 1969, the 52-story 555 California building was formerly known as the Bank of America Tower.

Before his presidency, Trump sought to cash out his stake in the Vornado properties, Insider reported. As banks and businesses cut ties with Trump during or after his presidency, Vornado reportedly considered buying out Trump’s stake, The Wall Street Journal reported earlier this year.

The firm is New York City’s largest commercial real estate owner and manager.

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Hedge funds have dumped over $100 billion in Treasurys this year, accelerating the bond market’s vicious sell-off

us cash
In this photo illustration one hundred US dollar banknotes are seen on display.

  • Hedge funds have sold over $100 billion in Treasurys since January, becoming big contributors to the bond-market slide, Bloomberg reported.
  • Investors in the Cayman Islands have been the biggest net sellers of US sovereign debt.
  • The sell-off by hedge funds began before the latest round of US government fiscal stimulus.
  • See more stories on Insider’s business page.

Hedge funds have played an instrumental role in this year’s rout in the US bond market by selling off more than $100 billion in Treasurys, according to a Bloomberg report.

Investors in the Cayman Islands, a major financial center and a known domicile for leveraged accounts, have been the biggest net sellers of US government debt, offloading $62 billion of sovereign bonds in February and dumping $49 billion in January, with Bloomberg citing data from the Treasury Department.

The sell-off began after the early January Senate run-off elections that were won by two Democrats. The victories gave that party a 51-vote majority in the upper house of Congress, including Vice President Kamala Harris, paving the way for a large new round of government fiscal spending. In March, President Joe Biden signed into law a $1.9 trillion stimulus package that passed 51-50 in the Senate.

The rollout of COVID-19 vaccines also contributed to investors deciding to exit bonds. As bonds sold off, rising yields prompted a return of convexity-type hedging flows, Bloomberg reported.

The bond market sell-off this year drove the widely watched 10-year Treasury yield above 1.7% for the first time since early 2020. The yield has since pulled back to around 1.58%.

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Americans with more education are optimistic about the economy. The rest aren’t.

nevada las vegas coronavirus unemployment
Entertainment and events have come to a halt during the COVID-19 pandemic, highly impacting Las Vegas’ work force.

  • A Morning Consult analysis looked at consumer confidence throughout the pandemic.
  • It has a K shape like the wider recovery, with more educated Americans more confident about work.
  • The new stimulus could change this K shape, but may not solve things like delayed rent payments.
  • See more stories on Insider’s business page.

As the coronavirus pandemic disrupted life throughout 2020, economists debated the shape of the recovery from it. Would it be a V shape, a U shape, or even an L shape?

The answer that emerged was something different: A K shape, in which the well off recover like they’re in a V, and lower-income Americans never recover at all. President Joe Biden validated the diagnosis back in 2020, on stage during a presidential debate.

It stands to reason, therefore, that consumer confidence would follow the same K shape, but the results are nevertheless striking. A new analysis from Morning Consult, looking at consumer confidence throughout the pandemic, found lower-income Americans’ confidence in the economy dropped and stayed low during a slow rebound. Meanwhile, higher-educated Americans confidence rebounded like a V and continued to grow. In every state, people with bachelor’s degrees earn more than people without bachelor’s degrees.

John Leer, an economist at Morning Consult and the author of the analysis, told Insider that over the summer, people with bachelor’s degrees felt more confident that in their ability to hold onto their jobs and not lose pay.

The story was the opposite for others. At that point, Leer said, there’s a “real realization among lower-income workers that while they may have been able to hold onto their job to date, they’re much more likely to suffer a loss of pay or income sometime in the future.”

That divide only grew more K-shaped as the pandemic continued. A few months later, Leer said, those higher-educated workers’ confidence in their ability to hold onto their jobs translated into a willingness to engage in wage bargaining; they pushed for increases in their pay and benefits.

“The exact opposite” was true for lower-income Americans.

“If they had managed to hold onto a job, they certainly were not in a position to ask for an increase in salary or benefits,” Leer said.

He added: “What you see over the course of the past year is a really strong divergence in the degree to which Americans exhibit confidence in the economy, in their own personal finances, based on their level of education.”

K shape persists throughout rounds of stimulus

While the size of the first stimulus was “appropriate,” some snags with the rollout impacted confidence. Leer said lower-income Americans were less likely to have bank accounts or to have filed taxes in 2019 – meaning it took longer for the IRS to distribute money to them.

There was a similar phenomenon with states’ unemployment programs and getting money to unemployed workers, Leer said; Insider’s Allana Akhtar and Nick Lichtenberg reported that 35 different states ran into difficulties getting unemployment insurance to their jobless residents.

“As a result, we actually see confidence among those people with higher incomes rebounding a lot faster, because they were both more likely to receive the money they were due sooner, and, in addition, they were more likely to be employed in sectors that rebounded faster,” Leer said.

Notably, checks went out faster with the second stimulus, and confidence and spending grew – although higher-income Americans already had elevated levels of confidence.

“I view the recovery plan essentially as a lifeline for folks who are really struggling right now to make ends meet,” Leer said.

Prior research from Morning Consult found that the $1,400 stimulus checks in the $1.9 trillion stimulus package could help 22.6 million Americans pay their bills through July.

But when it comes to the K-shaped recovery, we’ll probably get a sense of how that’s playing out in September or October, according to Leer; it’ll mostly depend on what job recovery looks like.

“The gap in the so-called K-shaped recovery will depend on getting lower income and less well-educated workers back to work,” Leer said.

There’s also broader issues around what Leer calls “deferred liabilities” – the rent and mortgage payments that millions of Americans haven’t been able to pay over the past year. While the American Rescue Plan does offer billions in housing assistance, some progressives are saying it’s not enough to close the gap. Rep. Ilhan Omar of Minnesota just introduced the Rent and Mortgage Cancellation Act; she said that, currently, 12 million Americans owe $6,000 in back-rent on average.

To address this, Leer says “we have to be very honest with ourselves.” He said he would take an approach similar to a financial institution with someone who can’t pay back their debt.

“You’ve got to make some sort of calculated decision as to whether or not it’s reasonable to ask somebody to pay back what they owe,” Leer said. There could be families, he said, who haven’t been able to pay their rent for 12 months – and may not be able to for the whole pandemic.

“That sort of debt overhang is gonna slow down the recovery going forward. And I would hope that we as a country come up with some sort of solution to that.”

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Manhattan DA’s probe ramps up, placing new scrutiny on Trump’s debt-ridden New York properties

trump tower debt buildings
Banks have now placed three of the four of former President Donald Trump’s real estate holdings on debt “watch lists,” CBS News said.

  • The Manhattan DA probe into former President Donald Trump is heating up, Insider reported on Friday.
  • The investigation is placing new scrutiny on Trump’s commercial properties.
  • Banks have placed three of the former president’s buildings on debt “watch lists,” CBS News said.
  • See more stories on Insider’s business page.

As Manhattan District Attorney Cyrus Vance Jr.’s probe into former President Donald Trump steps up a gear, four of Trump’s New York properties have come under renewed scrutiny.

Trump Tower, Trump International Hotel and Tower, 40 Wall Street, and Trump Plaza have missed lenders’ earning projections for five consecutive years, CBS News reported.

Banks have now placed three of the four real estate holdings on debt “watch lists,” the media outlet said.

Mortgage-payment processors have flagged the loans tied to these three properties due to consistent financial underperformance, CBS said.

Wells Fargo and other banks have told investors that reduced incomes on these holdings, due partly to the COVID-19 pandemic, could result in the properties not generating enough money to cover their mortgage payments, CBS News reported.

In addition to presenting Trump with financial troubles, investigations into these properties could also pose legal challenges.

The Manhattan District Attorney’s office has subpoenaed a New York property tax agency as part of the broad criminal probe, Reuters reported. Prosecutors are looking for signs of possible fraud, the media outlet said.

While Vance’s sprawling probe’s exact scope is not known, court filings suggest that he could be looking into whether Trump and the Trump Organization violated New York laws by manipulating the values of these commercial properties for tax and loan purposes.

The wide-ranging investigation into whether Trump or his businesses violated state tax laws could be reaching its conclusion imminently, Insider reported on Friday.

John Dean, President Richard Nixon’s White House counsel who played a major role in the Watergate scandal, said on Twitter that Trump could be indicted in just a matter of days.

“From personal experience as a key witness, I assure you that you do not visit a prosecutor’s office 7 times if they are not planning to indict those about whom you have knowledge,” Dean’s tweet said.

This refers to Michael Cohen, Trump’s former personal attorney, meeting with prosecutors for the seventh time this week. His latest meeting lasted for over two hours, NBC News reported.

Cohen, who was sentenced to three years in prison after pleading guilty to several felonies, has previously testified to Congress about Trump’s alleged financial mismanagement. In the 2019 testimony, Cohen said that Trump had manipulated the value of assets “when it served his purposes.”

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Citi is reportedly blocking debt deals with firms that kept the bank’s accidental $500 million payout

citi bank branch
  • Citigroup is blocking investment firms that wouldn’t return an accidental Revlon wire from future debt offerings led by the bank, according to a Bloomberg report.
  • Citi accidentally transferred nearly $900 million to Revlon lenders last year when it meant to transfer only $8 million.
  • A judge ruled last month that Citi can’t recoup the $500 million 10 investment firms refused to send back.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

A botched debt repayment by Citigroup is now being used by the bank as reason to block certain investment firms from future debt offerings, according to a report from Bloomberg.

In what is considered to be “one of the biggest blunders in banking history,” Citigroup accidentally sent nearly $900 million to Revlon lenders last year when it meant to only send about $8 million.

While some firms returned the money to Citigroup, others didn’t, with 10 investment firms holding onto more than $500 million of the nearly $900 million accidental payment. A federal judge ruled last month that those investment firms do not have to return the money to Citigroup. Citigroup is appealing the decision.

Now, Citigroup is retaliating by blocking these 10 lenders from participating in certain debt offerings led by the bank, Bloomberg reported, citing people with knowledge of the matter. The investment firms targeted by Citigroup include Brigade Capital Management, HPS Investment Partners, and Symphony Asset Management, according to the report.

It’s unclear whether the retaliation by Citigroup will be a big blow for the targeted firms, but it’s hard to avoid Citigroup in debt markets given that it is one of the largest underwriters of new bonds and loans, according to Bloomberg.

However, the targeted firms can still participate in debt offerings led by Citigroup if the issuer specifically requests for their participation, Bloomberg reported.

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Stocks look ‘resilient’ as investors pour $120 billion into equity ETFs in the face of rising rates, BlackRock says

trader Gregory Rowe
  • Inflows into equity ETFs of $120 billion are outpacing inflows to bond ETFs, BlackRock said in a note Monday. 
  • Stocks and bond yields generally have been moving higher simultaneously as the US growth picture improves. 
  •  Value and cyclical stocks are finding favor among investors, said the asset manager. 
  • Visit the Business section of Insider for more stories.

Inflows into the equity market are strong despite the spike up in rates as investors respond to economic growth prospects by embracing risk and not staging a “taper tantrum”, BlackRock said in a note Monday.

Equity exchange-traded funds have raked in $120 billion so far this year, outpacing inflows into fixed income ETFs by 4:1, according to iShares data outlined by Gargi Chaudhuri, head of US iShares markets and investments strategy at BlackRock.

That rush of investor cash into equities has taken place at the same time that Treasury bond yields have made notable moves higher, including a jump past 1.5% on the 10-year yield last week.

“That’s not because the stock and bond markets have become untethered, but rather because rates are moving for the right reason: stronger U.S. growth,” wrote Chaudhuri in the note, describing equities as “resilient”. 

Economists have broadly been increasing their forecasts for economic growth as vaccinations to prevent COVID-19 continue to accelerate. Meanwhile, House representatives in Washington last week passed a proposed $1.9 trillion stimulus bill, sending it to the Senate for approval. The US economy in 2021 could grow by the most in decades, said John Williams, president of the Federal Reserve Bank of New York, last week.  

“Unlike previous bouts of rising rates (like the Taper Tantrum of 2013), equity investors have generally responded with risk-on reallocations into pro-cyclical exposures this time around,” said Chaudhuri.

The response by investors could also be explained by real rates remaining “extremely accommodative” at around -70 basis points after the recent rise, she added. Real interest rates exclude the effects of inflation.

ETFs skewed towards value and cyclical stocks will keep benefiting as rates continue to rise and the yield curve steepens, Chaudhuri said, “with over $8 billion of ETF inflows to the value factor corroborating this view.” The inflows of $8 billion represent nearly as much as the previous six months combined, BlackRock said.

Meanwhile, earnings forecasts for 2021 and 2022 should increase through the spring and summer, “further cushioning in the impact of the rise in Treasury yields,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a Monday note.

Shepherdson said the spread between Treasuries and the S&P 500 earnings yield recently fell to 115 basis points after widening by 363 basis points at the peak.

“A narrower spread is no guarantee of future equity gains, but it ought to provide of measure of comfort,” he wrote.

This article and headline has been corrected from an earlier version that said $8 billion has flowed into ETFs this year. That figure refers to inflows into value stock ETFs. The correct figure for year-to-date inflows into ETFs is $120 billion. 

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Treasury yields spike to highest in over a year as investors weigh inflation concerns against recovery prospects

money
  • The 10-year yield zoomed past 1.5% on Thursday, reaching a level not seen since February 2020
  • The pace of the selloff in bonds has “increased severely” over the past few weeks, according to a fixed-income strategist.
  • The selloff comes as Congress is set to vote on a $1.9 trillion stimulus package 
  • Visit the Business section of Insider for more stories.

The yield on the US 10-year Treasury note surged to its highest in more than a year, with the rapid rise stoked by investors continuing to price in economic recovery expectations and related expectations for a pickup in inflation.

The 10-year yield hit as high as 1.545%, punching above 1.5% for the first time since February 21, 2020. The move came just a day after it pushed past 1.40%.

“It’s been a sharp selloff and what we’ve been talking about is how the pace of the selloff has increased severely over the last two or three weeks,” Scott Buchta, head of fixed income strategy at Brean Capital, told Insider on Thursday. Yields rise when bond prices fall.

“We’re probably going up into the 170s, 180s at this point,” in terms of the 10-year yield, he said.

Investors are seeing signs that the domestic and global economy are on course for growth this year after falling into recession in 2020 as the COVID-19 outbreak spread. This has fueled expectations for an increase in inflation.

The 10-year breakeven inflation rate, a gauge of the market’s inflation expectations, was at 2.17%. The breakeven rate is the difference in yield between 10-year Treasuries and 10-year Treasury Inflation-Protected Securities, or TIPS. That rate recently reached its highest level since 2014, according to Bloomberg data. 

One of the worries in the bond market is centered on the financial aid package that US lawmakers are expected to begin voting on during their session on Friday.

“How much stimulus can the market and the economy absorb?,” said Buchta. “There’s growing concern about the impact that additional supply could have on the market should Congress force through a $1.9 trillion stimulus package that may be too big for the economy and the markets to absorb.”

Read the original article on Business Insider

Treasury yields spike to highest in over a year as investors weight inflation concerns against recovery prospects

money
  • The 10-year yield zoomed past 1.5% on Thursday, reaching a level not seen since February 2020
  • The pace of the selloff in bonds has “increased severely” over the past few weeks, according to a fixed-income strategist.
  • The selloff comes as Congress is set to vote on a $1.9 trillion stimulus package 
  • Visit the Business section of Insider for more stories.

The yield on the US 10-year Treasury note surged to its highest in more than a year, with the rapid rise stoked by investors continuing to price in economic recovery expectations and related expectations for a pickup in inflation.

The 10-year yield hit as high as 1.545%, punching above 1.5% for the first time since February 21, 2020. The move came just a day after it pushed past 1.40%.

“It’s been a sharp selloff and what we’ve been talking about is how the pace of the selloff has increased severely over the last two or three weeks,” Scott Buchta, head of fixed income strategy at Brean Capital, told Insider on Thursday. Yields rise when bond prices fall.

“We’re probably going up into the 170s, 180s at this point,” in terms of the 10-year yield, he said.

Investors are seeing signs that the domestic and global economy are on course for growth this year after falling into recession in 2020 as the COVID-19 outbreak spread. This has fueled expectations for an increase in inflation.

The 10-year breakeven inflation rate, a gauge of the market’s inflation expectations, was at 2.17%. The breakeven rate is the difference in yield between 10-year Treasuries and 10-year Treasury Inflation-Protected Securities, or TIPS. That rate recently reached its highest level since 2014, according to Bloomberg data. 

One of the worries in the bond market is centered on the financial aid package that US lawmakers are expected to begin voting on during their session on Friday.

“How much stimulus can the market and the economy absorb?,” said Buchta. “There’s growing concern about the impact that additional supply could have on the market should Congress force through a $1.9 trillion stimulus package that may be too big for the economy and the markets to absorb.”

Read the original article on Business Insider

10-year Treasury yield nears highest in a year as recovery prospects strengthen

money
  • The yield on the 10-year Treasury note was nearning 1.374%, which would mark the highest level since February 2020. 
  • Yields have been surging as investors sell off bonds on expectations that recovery in the US economy will lead to higher inflation. 
  • Bonds are looking undervalued against stocks, says Bank of America 
  • Visit the Business section of Insider for more stories.

The 10-year Treasury yield pushed close to its highest level in a year on Monday, as the outlook for economic recovery prompted investors to continue selling bonds and search for higher-yielding assets.

The yield hit 1.352%, just shy of a 12-month high of 1.374% logged on Feb. 24, 2020.

The yield on the note has climbed about 43 basis points since the start of the year when it was at 0.92%. Yields rise when prices fall.

The move is part of a broader rise in global bond yields that reflects expectations for further economic recovery and a related pickup in inflation as the COVID-19 pandemic subsides.

The latest signal of growth in the US economy arrived Monday from the Conference Board. The business think-think said its Leading Economic Index rose by 0.5% in January to 110.3, better than the 0.3% consensus estimate from Economy.

“As the vaccination campaign against COVID-19 accelerates, labor markets and overall growth are likely to continue improving through the rest of this year as well,” said Ataman Ozyildirim, the Conference Board’s senior director of economic research, in a statement. The group now expects the US economy to expand by 4.4% in 2021 following its contraction of 3.5% in 2020.

The 10-year breakeven inflation rate, which measures the market’s inflation expectations, was at 2.14% and recently hit its highest level since 2014, according to Bloomberg data. The breakeven rate is the difference in yield between 10-year Treasuries and 10-year Treasury Inflation-Protected Securities, or TIPS. 

Bank of America on Monday said US yields have already reached its year-ahead targets, including the 10-year surpassing 1.30% and the 30-year bond yield above 2.16%.

“This is now realized, but it is over? The biggest risks to current trends include the long-term support levels nearby (yield resistance),” the investment bank said in a note Monday. As well, weekly resistance strength indexes are “starting to flash oversold” signs and bonds are looking undervalued against small-cap stocks “similar to the dot com and [Global Financial Crisis] era,” it said.

Investors ditching bonds have been putting money broadly into equities, fueling a 15% year-to-date surge in the Russell 2000 index of small-cap stocks.

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