My bookmarks

Pins are saved using cookies. Deleting them from your browser will delete your preferences.


US average hourly earnings came out last Friday at +2.9% year over year against +2.6% expected

08 February 2018

Last week there was only one topic : fixed income markets !

The US 10y Note yield continues to go higher: 2.65% at the end of January and 2.85% last Friday, the highest since 2014. The German 10y Bund follows closely and rise from 0.63% to 0.75%, the highest since 2015. Reasons of that move?

  • FOMC was on the hawkish side. Fed’s tone was more confident on the inflation side;
  • Economic data continues to be strong (Consumer confidence, conference board, Chinese PMI, Manufacturing ISM…);
  • The most significant figure of last week was the average hourly earnings which came out at +2.9% yoy vs +2.6% expected. So far, wages failed to rise significantly in the US. Higher wages makes investors nervous about a potential surge in inflation and a stronger tightening of the Fed policy.

The equity markets, which had been quite immune to higher bond yields before, experienced a correction last week. There must be no connection with earnings announcements, which continue to be very positive (+15% growth on Eurozone EPS yoy). 

So THE major issue is where will bond yields stop rising?

  • Regarding the short-term rates, we think market pricing is consistent with current strong pace of macro indicators and what have been announced by various central banks. Unless a radical change in tone happens, we think there is a limited room to reprice central banks further. A radical change in tone seems not plausible to us since it would add more volatility to already volatile markets, and could harm central bank’s credibility which has been lengthily acquired;
  • Regarding the long-term rates, the issue is more difficult. The long term disinflationary trends remain valid: demography, high household and government debt burden, higher competition due to internet. On top of that, many insurance companies and pension funds which have long term liabilities should emerge to benefit from higher yields. The markets can continue to get excited, but we think valuations are starting to look more attractive (3.1% for US 5y5y forward yield).

More about:

The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit

La Française Group provides access to the expertise of a number of asset management companies around the world. To provide you with the most relevant information, we have developed an interface to present the full range of products available for your investor profile and country of residence.

Present yourself


Your country of residence

Your language

Your profile

By continuing browsing on this website, you accept the use of cookies and other tracing devices s as to allow you to receive information suited to your profile, facilitate information sharing on social networks, guarantee the best browsing experience possible and to create statistics. To find out more, we invite you to consult our Privacy and Cookies policy. Find out more.