Bonds in Focus as Dollar stumbles

US10YR.F, H1

Bonds have extended lower following the very mild trade prices report, which harbored no major non-oil inflation missives. Meanwhile yields are consolidating near highs as prices drifted lower. The jump in yields however started overnight, after a thinly sourced report that Chinese officials were considering halting their purchases of Treasuries. The 2-year yield had popped to 1.984% highs on the report and has since eased to 1.97%; the 5-year topped 2.36% before slipping to 2.34%; the 10-year probed 2.597% then pulled back to 2.58%; and the 30-year yield jumped to 2.946% before easing sub-2.94%. On balance, yields are 0.8-5.3 basis points higher.

The US10YR.F rose over 22 pips before backing down to 122.67. It is currently in consolidation mode, between 122.65-122.80 area,with a slight uptick in the wake of the U.S. trade prices and with weekly oil inventories to be released shortly.

The General weakness though is based on the cutting purchases of Treasuries out of China, which came on top of the BoJ’s announcement yesterday tapering longer dated QE purchases, while the ECB is trimming purchase volumes as well. Additionally, the Riksbank minutes showed a more hawkish than expected tilt. Meanwhile, China’s inflation reports were mixed. Global equities are mostly lower too as the bearish news on bonds is eliciting some profit taking after record highs.

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Andria Pichidi

Market Analyst


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