US 30yr yield rises to the highest level since July erasing NFP-induced dropWhat are the interest rates expectations ahead of the key US data this week?Eurozone August preliminary CPI +2.1% vs +2.0% y/y expectedECB’s Šimkus: No reason to adjust rates nowTop Japanese lawmakers to step down as ruling LDP party review upper house election defeatThe cure for high rates might be higher rates: a case study with UK long term yieldsTraders turn to the dollar as yields blowout finally takes a toll on marketsEquities start to get hit by bond market rumblingsPound falls as UK long-end yields continue to blow upA mixed start to the day for European indicesECB’s Schnabel: I do not see a reason for a further rate cutBOJ’s Himino: Tariffs impact failing to materialise will bolster rate hike conditionsGold remains the standout today, eyes major upside breakout above $3,500Xi, Putin put on a united front at the SCO summitJapan government to compile economic measures to deal with inflation, tariffs – report
It was supposed to be a tranquil session today with just the Eurozone CPI on the agenda and limited newsflow, but that wasn’t the case. The UK 30yr yield jumped to a new cycle high and reached the highest level since 1998. This breakout triggered a wave of risk-off flows in the markets with equity indices falling.
The US dollar jumped across the board most likely due to heavy selling in the GBPUSD pair. The rise in US yields might have also helped the greenback.
The rise in long-term yields is a global phenomenon as market participants shy away from long term bonds due to high government spending and dovish central banks.
In the middle of all this, we got the Eurozone Flash CPI report. The data beat expectations slightly but overall didn’t change much in terms of market pricing. Nonetheless, it’s another reason for the ECB to stop talking about rate cuts because they don’t need any more cuts at all.
The most sane policymaker is again ECB’s Schnabel who not only confirmed that there’s no reason for another rate cut but has also mentioned that rate hikes could come earlier than people think.
In the American session, we have the US ISM Manufacturing PMI coming up. The latest S&P Global US PMIs were
very hot and the commentary even mentioned that the data is more in line
with rate hikes than rate cuts. Economic activity continues to pick up
and inflationary pressures intensify. The ISM is expected at 49.0 vs
48.0 prior.
The main event this week is of
course the NFP report but the sentiment and positioning into Friday’s
release will likely be shaped by the ISM and ADP data, so that’s
something to be aware of.
This article was written by Giuseppe Dellamotta at investinglive.com.