Global interest rates to rise further: Richard Ross

Rates are spiking, maybe a little overdone in the short-term, since treasuries are somewhat of a flight to safety. Infact we are almost a 4 percent points on the 10 years from the lows that we saw just last year, around 1.41, now testing the 2.42-2.50 level, says Richard Ross, Global Technical Analyst, Auerbach Grayson.

The rates may rise further, he says, adding that there is a lot more going on in terms of the rise in the US dollar against these emerging market currencies that is clearly driving the action here, than just the Fed announcement. Also Read: Here is what brokerages think about US Fed's plan Below is the verbatim transcript of his interview to CNBC-TV18: Q: The bond markets have been indicating this from the last one month, so why are the markets so surprised by what Bernanke had to say last night? A: Well, that is a good question. I think we had a little bit of a snapback rally going into the Bernanke testimony yesterday. So, in a sense, this is really unwound all of the good from that rally that we had. But yes, bond rates or interest rates have been backing up for months now. Infact we are almost a 4 percent points on the 10 years from the lows that we saw just last year, around 1.41, now testing that 2.42-2.50 level. Clearly rates are spiking here, could be overdone here in the short-term, keeping in mind that treasuries are somewhat of a flight to safety. If we continue to see some macro unrest, I think that is going to stick a bit there into the fixed income market and one will see those yields come off. I don't think the horse has left the barn as we say here in terms of the rise in rates. Q: Many economists today have said that they thought the Federal Reserves (Fed) outlook on the economy was a wee bit too optimistic, Why isn’t the market looking at it that way because if it is too optimistic then it is unlikely that we will see the beginning of a taper at the end of this year and it might get pushed out to 2014, especially, given that the lag effect of the sequester hasn’t yet started telling in all of the data? A: There are a lot of cross current rates now that the world even though we like to think here in the US is being driven by the US Fed and it has been seemingly for some time. There is so much going on in the emerging world with these global markets really taking it on the chin if you will. Then I think that is also driving some of the action here in the US, which is not just about the Fed, it is not just about the taper. Not that I dismiss it, it is a key concern here but once again there is a lot going on in terms of the rise in the US dollar against these emerging market currencies that is clearly driving the action here in the decline and these global equities markets and the backup in rates around the world. So, there is a lot more to it than just Fed speak if you will.