FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%
EUR/USD
1.1728
BTC/USD
42 567.79
GBP/USD
1.3640
USD/JPY
109.4710
USD/CHF
0.9230
USD/CAD
1.2802
EUR/JPY
128.3820

Sovereign bond selloff resumes after a short break


5 March 2021

Asian equity markets suffered hefty losses following yesterday’s declines in Wall Street as bond yields resumed their rally. Japan’s Nikkei 225 and Hong Kong’s HSI dropped nearly 3% with the rest of the Asian stock indices all in the red, while US stock futures show no signs of recovery. All three major indices are indicating a negative start led by Tech stocks. In currencies, the dollar ticked higher against its major peers with USDJPY climbing to a seven-month high above 107.

With US inflation expectations over the next five years reaching a 13-year high and long term-borrowing costs on the rise, central banks face tough challenges comforting investors. Financial conditions are tightening despite the monetary policy being loose and policymakers clearly signaling no intention of raising interest rates anytime soon.

The Federal Reserve may need to step up their game by targeting purchases of long-dated bonds to prevent yields from going higher, but so far there are no signs of them implementing this strategy. All eyes will be on Fed Chair Jerome Powell today for any signals of possible changes to monetary policy such as yield curve control.

The sovereign bond selloff is not confined to the US. UK 10-year gilts rose more than 10 basis points to 0.8% after Finance Minister Rishi Sunak announced the country’s 2021 budget. And despite the Eurozone being well behind in vaccinating their population and in terms of their economic recovery, bonds also sold off in Germany, France, Italy and Spain. That tells us it is not just economic fundamentals impacting bond prices, but there seems to be a domino effect caused by rising yields in the US.

Energy and Financials were the only sectors ending in the green on the S&P 500 yesterday. The shift to those value sectors will likely resume along with industrials and basic materials after the passing of Biden’s $1.9 trillion pandemic relief bill.

Oil is another asset class firmly on the radar of many traders. Prices rose for a second straight session after Brent crude tested a two-week low of $62.38 on Tuesday. While the record drop in US gasoline inventories lent prices some support, its today’s OPEC+ meeting that will dictate direction over the short-term. If Saudi Arabia chooses not to continue with its unilateral one million b/d output cut and the group increases production by another 500k b/d, we will end up with 1.5 million b/d additional output. That seems to be the base case scenario for many traders.

Given that recent price moves have been driven more by speculative trading than market fundamentals, any disappointment may lead to a sharp selloff. For prices to remain near their pre-pandemic levels or higher, we need to see a positive surprise. That could occur by keeping the group’s output unchanged or if we get a gradual rollback of Saudi Arabia’s unilateral cuts. It is hard to predict the next move of the cartel due to the various opinions within the group’s members, and that is what makes it an exciting event to watch.

#source

Related

Stocks bounce back after Evergrande panic
Stocks bounce back after Evergrande panic

As investors increasingly liken the Evergrande crisis with the collapse of the Lehman Brothers in 2008, they remain in the dark about the Chinese government's intentions...

21 Sep 2021

Oil Was Put on Hold
Oil Was Put on Hold

The oil price is falling after rallying before. Early in another September week, Brent is trading at $74.50 and has a lot of room to correct. The strong greenback...

20 Sep 2021

Dollar starts Fed week on front foot, stocks hit by Evergrande fallout
Dollar starts Fed week on front foot, stocks hit by Evergrande fallout

Fears of global contagion from the worsening crisis in China's property sector continued to weigh heavily on sentiment at the start of trading on Monday as markets...

20 Sep 2021

Dollar jumps, gold slumps, stocks nervous
Dollar jumps, gold slumps, stocks nervous

Worries that the US consumer is rolling over were dealt a major blow yesterday after the nation’s retail sales for August overpowered some gloomy forecasts. The retail sales...

17 Sep 2021

Energy is the play: how we get to $100 crude
Energy is the play: how we get to $100 crude

Natural gas futures in Europe and the UK are flying, while our natural gas (NG) CFD (the underlying is traded on the NYMEX) pushed over $5.60 and into 7-year highs...

16 Sep 2021

Are investors sleeping on systematic risk in China?
Are investors sleeping on systematic risk in China?

It’s time to talk about China. The situation is getting dicier as the nation’s second-largest property developer - Evergrande - is on the verge of default. Trading in the company...

16 Sep 2021


Forex Forecasts

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
Vantage FX information and reviews
Vantage FX
78%
Moneta Markets information and reviews
Moneta Markets
77%

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.