GLOBAL BOND MARKETS


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Technical Overview


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THEMES AFFECTING Bonds



Dow Jones Utilities Average - Daily Chart

Dow Jones Global Utilities Average - Daily Chart

Bonds as related to other asset classes

Bond prices and bond yields are many times the drivers behind price movements in currencies and other asset classes. In this section, we aim to explain how those movements are being perceived and traded by our dedicated contributors and in-house analysts.

Utilities are big borrowers and their profits are enhanced by lower interest costs. Conversely, the utility average tends to decline when investors expect rising interest rates. Because of this interest-rate sensitivity, the Utilities Average is regarded by some as a leading indicator for the stock market as a whole.

Utilities are part of our Risk-On/Off indicators you can find by clicking here.

Bond prices and bond yields trend in opposite directions. This is important for understanding most of the analysis and news published on this page.

It's also important to know the underlying dynamic on why a bond's yield is rising or falling: it can be based on interest rate expectations or it can be based on market sentiment -uncertainty- and a "flight to safety" to bonds which are traditionally considered less risky.

The rate of change of interest rates, either the target rate or market rates, is important because this causes either stocks or bonds become more attractive. When this happens prices will tend to trend as money flows from one vehicle to the other until the new relationship is adequantely reflected in prices.

Bonds and stocks are always competing for investor money, and less so commodities. These usually trend in opposite direction of bond prices (falling commodity prices usually produce higher bond prices, vice versa); therefore, commodities would trend in the same direction as interest rates.

US Treasuries explained

If you are trading USD based or quoted pairs, watch the US bond market since a movement in Treasury yields impacts the US dollar. The driver of many movements in Treasury yields are partly driven by comments from Fed officials, so pay close attention to any news coming from US monetary authorities. US stocks usually get a boost from rising bond prices (falling Treasury yields), specially in inflationary times. But if they don't, then it's worth looking for market sentiment and reasons why the equity markets appear to be taking a more cautious stance. US stocks prices can also rise with falling Treasury prices (with rising yields) during a deflationary environment. In this case stocks and interest rates rise together which spurs global demand for the US Dollar.

UK Gilts explained

Global bond prices tend to move in synchrony. But there are moments when a country's bond market experiences a sharper movement than other bonds markets. Sometimes it may be a currency movement: The Gilt is the 10-year benchmark in the UK fixed income market. It's correlation to the Sterling is usually positive and decoupling between both markets serves as an early alert that some Intermarket relationship has changed. Changes in foreign exchange prices can overwhelm relative return calculations for international investors buying Gilts as an investment. When stripped out the currency component, UK Gilts should still provide some return to investors otherwise other bond markets, Treasuries for instance, may become attractive.
It is also true that a prolonged trend in energy prices is also a factor to consider as it will affect inflation expectations and thereby BOE's monetary policies.

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Latest Bonds & Interest Rates Analysis


Latest Latest Bonds & Interest Rates Analysis

Editors' picks

EUR/USD extends slide on hawkish Powell comments, trades below 1.1250

EUR/USD extended its daily slide during FOMC Chairman Powell's press conference and fell to its lowest level in more than a month below 1.1250. Reflecting the renewed dollar strength, the US Dollar Index is up more than 0.5% on a daily basis at 96.50.

EUR/USD News

GBP/USD drops below 1.3500 on renewed dollar strength

GBP/USD lost its traction and fell into the negative territory below 1.3500. The greenback seems to be capitalizing on FOMC Chairman Jerome Powell's hawkish remarks, causing the pair to continue to edge lower. 

GBP/USD News

USD/JPY remains well supported above 113.70 ahead of Fed decision

USD/JPY recaptures 114.00 amid resurgent US dollar demand. Markets expect Fed to shift to the hawkish pivot, hinting at a March rate hike. 50-DMA is the level to beat for bulls while above the critical support at 113.72.

USD/JPY News

Gold bears sink their teeth into the market on hawkish Powell pivot

At $1,817.59, gold is moving towards the close and down some 1.65% after falling from a $1,850.11 high to test a low of $1,814.98. The drop came on the back of a hawkish twist at the Federal Reserve event on Wednesday.

Gold News

WTI briefly surpasses $87.00 level, eyes multi-year highs as geopolitical tensions eyed

Front-month WTI futures hit fresh highs for the week above the $87.00 level on Wednesday, as a broad risk appetite recovery combined with ongoing geopolitical and OPEC+ supply concerns underpinned the price action. WTI is now nearly $4.50 or over 5.0% higher versus Monday’s lows near $82.00 per barrel and earlier in the session when prices surpassed the $87.00 mark, was only a whisker below last week’s multi-year highs at $87.90 per barrel.

Oil News

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