GLOBAL BOND MARKETS
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THEMES AFFECTING Bonds
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Bonds as related to other asset classes
Bond prices and yields often drive price movements in currencies and other asset classes. In this section, we aim to explain how these movements are analyzed and traded by our dedicated contributors and in-house analysts.
A bond yield is the return an investor gets on a bond. Contrary to many other assets, bond prices and bond yields are inversely related. When the price of a bond increases, the yield decreases. When the price of a bond decreases, the yield increases. Thus, a so-called rally in the bond market means that yields decreased, while a bond sell-off means that yields increased.
It is important to know the underlying dynamic of why a bond's yield is rising or falling. This movement can be based on interest rate expectations or market sentiment, such as uncertainty, which triggers a ‘flight to safety’ to bonds, traditionally considered less risky compared to stocks.
The change in interest rates, either the target rate or market rates, is important because it makes stocks or bonds become more attractive. When this happens, prices tend to trend as money flows from one vehicle to the other until the new relationship is adequately reflected in prices.
Bonds and stocks are in constant competition for investor money, and less so commodities. These, particularly Gold, usually trend in the opposite direction of bond prices (falling commodity prices usually lead to higher bond prices, and vice versa). Therefore, commodities generally trend in the same direction as interest rates.
US Treasuries
If you trade USD-based or USD-quoted currency pairs, it is crucial to monitor the United States (US) bond market, as movements in Treasury yields impact the US Dollar. Treasury yields’ movements are often driven by comments from Federal Reserve (Fed) officials, so staying updated on news coming from US monetary authorities is essential. US stocks usually get a boost from rising bond prices (falling Treasury yields), especially in inflationary periods. But if they don't, then it's worth looking for market sentiment and identifying reasons for the cautious stance in bond markets. US stock prices can also rise alongside falling bond prices (rising Treasury yields) during deflationary periods. In such cases, both stock prices and interest rates rise, driving global demand for the US Dollar.
UK Gilts
Global bond prices tend to move in synchrony, but occasionally, a country's bond market may experience sharper movements compared to others. Sometimes this volatility is related to currency fluctuations. The Gilt, the 10-year benchmark in the United Kingdom (UK) fixed-income market, typically has a positive correlation to the Pound Sterling (GBP). A decoupling between these markets can serve as an early alert that an intermarket relationship has shifted. Changes in foreign exchange prices can overwhelm relative return calculations for international investors buying Gilts. Stripping out the currency component, UK Gilts should still provide returns to investors. Otherwise, other bond markets such as US Treasuries, may become attractive. Additionally, a prolonged trend in rising energy prices is a factor to consider as it will affect inflation expectations and therefore the Bank of England's (BOE) monetary policy.
Latest Latest Bonds & Interest Rates Analysis
Editors' picks
EUR/USD deflates to fresh lows, targets 1.1600
The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.
GBP/USD breaks below 1.3400, challenges the 200-day SMA
GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.
Japanese Yen weakens further; USD/JPY hits multi-week top on firmer USD ahead of US NFP
The Japanese Yen adds to its intraday losses through the first half of the European session amid the uncertainty over the timing of the next interest rate cut by the Bank of Japan and escalating China-Japan row. This, along with worries that consumption momentum could fade if inflation continues to outpace wage growth in early 2026, overshadows an unexpected rise in Japan's Household Spending data for November.
Gold flirts with yearly tops around $4,500
Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.
WTI Price Forecast: Short-term momentum improves above 21-day SMA
WTI eases on Friday after rallying nearly 4% the previous day as markets reassess US oversight of Venezuelan Oil. US President Donald Trump signals potential $100 billion investment in Venezuela’s Oil sector, reviving oversupply concerns. Technically, near-term momentum improves, but the longer-term trend remains fragile.