Global core bonds lost ground yesterday with US Treasuries underperforming German Bunds. The risk-off rally of late eased as US President Trump was said to delay his decision to impose auto tariffs by 6 months, avoiding trade disputes with important partners (the EU, Japan). European equity markets edged higher, weighing on core bonds. Solid US eco data lifted sentiment further. Weekly jobless claims fell from 228k to 212k, close to multi-decade lows, while building permits and housing starts both rose in April. The Philly Fed Business Outlook increased from 8.5 to 16.6 in May, although the details were less outstanding than the headline number suggests. US Treasuries edged lower. The US yield curve bear flattened with yield changes in the range of +1.4 bps (30-yr) to +3.3 bps (2-yr). The German yield curve was only modestly lifted with gains up to +0.9 bps (30-yr). Peripheral spreads over the German 10-yr yield tightened with Greece (-9 bps) and Italy (-7 bps) outperforming.

Sentiment is mixed across Asia. While the threat of US auto tariffs has most likely been put on the back burner for now, the US-Sino trade spat continues. This morning, Chinese state media signalled a lack of interest to continue trade talks with the US under the current threat to escalate tariffs and the absence of "sincerity" on the US side of negotiations. Core bonds resume the upward trend.

The trade story could shift to the background with the EU and Japan most likely excluded from Trump's trade crusade. We wait and see whether investors are willing to continue yesterday's risk rally. China signalling a lack of interest in resuming trade talks is probably shifting investors already back to risk-off, further supporting core bonds. The eco calendar is not expected to offer much guidance for trading today. In the US, the University of Michigan sentiment for May gets released and is expected to stabilize after last month's decline to 97.2. The EMU releases last month's new car registrations and a final reading of April CPI's. EU finance ministers meet in Brussels, while Fed governors Williams and Clarida are wildcards.

Long term view: markets concluded that the ECB missed out on this cycle. They even start pondering the possibility of an additional deposit rate cut. The downtrend in the German 10-yr remains in place so far. Regarding Fed policy, markets are now largely discounting a Fed rate cut by December. The US 10-yr yield earlier this month temporary returned above the lower bound of the previous 2.5%-2.79%. However, the cycle low (2.34% is again on the radar).

Download The Full Sunrise Market Commentary

This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex Analysis

Editors’ Picks

EUR/USD consolidating gains ahead of all-important ECB decision

EUR/USD is trading above 1.12 but off the two-month high of 1.1257. Tension is mounting ahead of the ECB decision, where Lagarde is set to announce additional QE, potentially worth €500 billion. 


GBP/USD retreats from five-week top to sub-1.2600 area amid quiet session

GBP/USD snaps five-day winning streak to take U-turn from 100-day SMA, still above 1.2500. BOE’s Bailey tells banks to prepare for no-deal exit and downs the GBP. The US Dollar bounces off three-month low amid risk reset, pre-ECB moves.


Riots could assist US recovery by ending the economic paralysis

The US economy may be headed for a V-shaped recovery aided ironically enough by the demonstrations that have made nonsense of the continued social and business restrictions and the riots whose damage will require massive spending to repair.

Read more

Gold: Bounces back above $1,700 to keep buyers hopeful

Gold prices recover from immediate support line, 50-day SMA. The yellow metal’s failure to close below 50-day SMA, not to forget a six-week-old ascending support line keeps the buyers hopeful. Risk reset, cautious mood ahead of the ECB also favors the buyers.

Gold News

WTI retraces within an immediate triangle around $37.00

WTI seesaws near three-month high inside a two-day-old symmetrical triangle. The black gold rose to the highest since March 11 the previous day but MACD’s weakness dragged it back from $38.30.

Oil News

Forex Majors