Core bonds lost tremendous ground yesterday. Both the German Bund and US Note future slid from start to finish. Yesterday's main and only story featured a tariff rollback between the US and China if the phase one trade deal is completed. The first comments came from a Chinese ministry of Commerce spokesman, but White House economic advisor Kudlow later confirmed the advance: "If there's a phase one trade deal, there are going to be tariff agreements and concessions". The more hawkish trade officials in Washington still sound more guarded, but they seem to be a minority. Investors embrace the progress and expect the deal to be signed upon before the end of the year. US stock markets rallied to fresh all-time records, with European indices also recording multiyear highs. The German yield curve bear steepened with yields rising by 2.6 bps (2-yr) to 10.8 bps (30-yr). Changes on the US yield curve ranged between +6 bps (2-yr) and +9.9 bps (5-yr). The US 10-yr yield tested 1.94% resistance, but a break higher didn't occur. The US $19bn 30-yr Bond auction tailed somewhat, but overall demand was in line with average. 10-yr yield spread changes vs Germany ended close to unchanged with Greece (-5 bps) outperforming and Italy (+6 bps) underperforming. Asian stock markets cede slightly ground this morning with Japan outperforming (+0.25%). Core bonds trade slightly off yesterday's intraday sell-off lows. Overnight news flow remains extremely thin. Today's eco calendar remains confined to November University of Michigan consumer confidence. Consensus expects a stabilization at 95.5, but we don't expect the outcome to be crucial for trading. Risk sentiment on stock markets remains key. Main US/European indices since mid-October started frontrunning on less geopolitical uncertainty (Brexit & US-Chinese trade talks). On the one hand, quite some good news is already discounted. On the other hand, we don't see big reasons to be overly cautious. The US and China can still bring additional good news, by means of a date and location for signing off on their phase 1 trade deal. The long weekend ahead in the US (Veterans' Day) might cause some to take chips off the table, but we wouldn't buy into any core bond comeback at this stage.

Technically, the German 10-yr yield and US 10-yr yield both rebounded away from August lows following ECB/Fed September policy meetings. The German 10-yr yield broke above -0.41% resistance, improving the technical picture. Targets of this double bottom formation are -0.25% and -0.13%. The 38% retracement level of the Oct-Aug decline stands at -0.24%. The US 10-yr yield trades in the 1.43%-1.94% sideways trading channel. The upper bound is within reach.


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 eyes first monthly gain of 2020

EUR/USD is on track to post the first monthly gain of 2020. Technical breakout and EU fiscal hopes could push EUR/USD above 1.11 on Friday. On the data front, the focus will be on Eurozone CPI.


GBP/USD: Mildly bid above 1.2300 as UK enters Sino-American rivalry

GBP/USD probes intraday high after bouncing off lows near 1.2300. UK increases changes for China’s Huawei, offers citizenship to Hong Kong residents. EU’s Trade Chief says UK may have given up on Brexit deal. US President Trump’s presser will be key.


Cardano explodes over 1% in minutes, is $0.07 achievable on Friday?

Cardano is among the most active cryptocurrencies in the market this week. ADA/USD is exchanging hands at $0.0666 amid a battle to beat Thursday highs at $0.0680. On the other hand, the price has not been left behind especially after spiking by over 1% in a matter of minutes.

Read more

Gold pokes $1,721/23 resistance area

Gold prices extend the latest recovery from $1,711 as DXY refreshes two-month low. A confluence of 10-day EMA, nine-day-old falling trend line probes immediate upside. An ascending trend line from April 21 favors the bulls.

Gold News

WTI eyes record monthly surge

While West Texas Intermediate (WTI) crude's front-month contract has backed off from the 2.5-month highs reached earlier this week due to deteriorating US-China tensions, it is still on track to post its biggest monthly gain on record. 

Oil News

Forex Majors