BNY Mellon Weekly Market Commentary


Calling September a challenging month for performance is an understatement, with most fixed income and equity asset classes posting negative returns. As the chart below indicates, practically every fixed income asset class that we track posted negative returns for the month. This is the first time this year that we had seen this level of widespread weakness across all bond asset classes, making September the weakest aggregate month of the year. This performance was logged despite treasury yields once again falling towards the lows of the year on growth and geopolitical risk concerns. The story was not better for stocks, with global equity returns mostly in the red, despite the S&P hitting all time records twice during the month. Given the widespread underperformance of assets across the globe, it is convenient to attribute the fears of tighter monetary policy as a blanket explanation for the price action. In fact, two-year treasury yields had almost doubled over the past six weeks, rising from 40 bps in mid-August to a high of almost 60 bps a week ago. Driven by the Fed’s dot-plots and macro-prudential concerns, it certainly seems like an appropriate market response to begin building in more certainty with regard to a mid-2015 rate hike. However the use of rate hike concerns as a blanket excuse becomes shakier when we look at the rest of the treasury curve, which has continued to flatten precipitously on 10-year yields that are again near the low side of 2.4%.