Strange times in the US dollar and yields - ANZ
|Analysts at ANZ explained that foreign creditors seemingly have less appetite for US assets, with TIC data showing net selling of $42.8bn in long-term securities in December.
Key Quotes:
"Does this explain why the USD has been so tardy despite steadily improving data? If it does, why aren’t US bond yields rising more aggressively?
It’s not clear to us why US yields have been so slow to rise after last week’s bounce off lows, other than perhaps because of widespread short positioning.
US inflation and employment are near mandated Fed target levels, and it is clear from recent Fedspeak that rate hikes are around the corner (and the tone of Fedspeak suggests the risk is we see more if Trump’s fiscal easing comes to fruition).
US real yields are certainly very low compared to where they sit in places like NZ and Australia, so it’s likely that they have more heavy lifting to do. As they adjust higher, we expect them to take NZ long end rates with them, steepening the curve."
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