Marketbites: Japan Selling Treasurys To Lift Yen
Portfolio Manager Commentary:
Markets rose slightly on Tuesday ahead of midterm election results that may affect future levels of government spending and regulation. Market participants are expecting Republicans to take back the House of Representatives and possibly win the Senate as well when results start rolling in Tuesday night. Investors tend to like the notion of gridlock in Washington with a divided Congress and President because it will limit government spending, new taxes and regulations.
“If we have a gridlock, that will probably be the best thing that could happen for the market. The markets usually do very well when that happens,” said The Wealth Alliance’s Seth Cohan.
SolarEdge Technologies was the leading outperformer in the broader market index, up 19% after reporting record revenue in its most recent quarter. Elsewhere, shares of Kohl's jumped 7% after the department store chain announced the departure of its CEO next month. Meanwhile, shares of Lyft dropped nearly 23% on disappointing quarterly results.
Chart of the Day:
Japan has been one of the world's biggest buyers of U.S. Treasurys for years which has helped hold down borrowing costs for American businesses and consumers. That is now changing as Japan's government is selling short-term U.S. bonds in an effort to prop up its currency. At the same time, some Japanese institutional investors are also reducing their exposure to foreign bonds, including U.S. Treasurys. Part of the reason this is happening is because of the Fed rising rates which has weakened the yen and made it costlier for Japanese investors to hedge against currency fluctuations when buying U.S. assets.
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