What to make of the (slightly) mixed messages in markets

In recent weeks, it has often looked as though equity markets aren’t quite on the same page as bond and currency markets. Indeed, despite its fall today, the S&P 500 remains within touching distance of the all-time high it reached only last week. And while the index is down by around 1.5% today (as of 16:30 GMT), that pales in comparison to the plunge in government bond yields: the US 10-year Treasury yield is down ~10bp, one of the largest single day falls in recent years. Indeed, since early June, it has fallen by ~40bp and is now at its lowest level since early February. Meanwhile, in currency markets the US dollar has strengthened across the board, and safe havens have generally outperformed riskier currencies.
Jonas Goltermann Senior Markets Economist
Continue reading

More from Capital Daily

Capital Daily

How the new coronavirus variant is shaking up markets

It’s impossible to say with certainty how much of a threat the new coronavirus variant emerging in southern Africa poses, but a few aspects of the market reaction so far may shed some light on what to expect over the next few weeks if the news is bad.

26 November 2021

Capital Daily

We think E-Z peripheral spreads will widen further, eventually

While the accounts of the ECB’s October meeting and recent comments by some ECB officials suggest to us that there might not be much scope for euro-zone “peripheral” spreads to increase further in the near term, we still expect them to widen slightly in the next year or two as the ECB gradually normalises monetary policy.

25 November 2021

Capital Daily

Steeper NZ yield curve may be sign of things to come elsewhere

We think developed market yield curves will generally steepen in the near term, as central banks don’t deliver as many rate hikes as appear to be discounted in markets.

24 November 2021

More from Jonas Goltermann

FX Markets Weekly Wrap

Dollar continues to edge higher despite stalling US yields

While the US dollar rose sharply after Tuesday’s exceptionally strong inflation print, that was partly offset by Fed Chair Powell’s relatively dovish comments in his testimony to Congress. But overall, the greenback continues to trade on the front foot as the tone in equity and bond markets remains somewhat defensive amid an ongoing reassessment of the narrative underpinning the “reflation trade”.

16 July 2021

FX Markets Update

What to make of the dollar rally & why we think it will continue

The US dollar has risen significantly since the June FOMC meeting, with another surge after today’s strong inflation data, and we think the greenback will make further headway in the second half of the year.

13 July 2021

Capital Daily

China’s RRR cut & the outlook for markets

The surprise decision on Friday by the PBOC to cut the reserve requirement ratio (RRR) for China’s banks suggests to us that there will be further downward pressure on government bond yields in China and on the renminbi.

12 July 2021
↑ Back to top