GLOBAL BOND MARKETS


USD/JPY drops to fresh daily low, around mid-129.00s post-US PCE Price Index


Technical Overview


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THEMES AFFECTING Bonds



iShares Global Utilities ETF - Daily Chart

iShares US Utilities ETF - 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 retreats to 1.0850 area as US Dollar rebounds

EUR/USD retreats to 1.0850 area as US Dollar rebounds

EUR/USD has extended its slide toward 1.0850 in the American session. Profit-taking ahead of the weekend and the negative shift witnessed in risk sentiment seems to be helping the US Dollar gather strength against its rivals, weighing on the pair.

EUR/USD News

GBP/USD trades on the back foot below 1.2400

GBP/USD trades on the back foot below 1.2400

GBP/USD is having a difficult time gathering recovery momentum and trading in negative territory below 1.2400 on Friday. Although the data from the US showed that PCE inflation continued to soften in December, the US Dollar holds its ground heading into the weekend.

GBP/USD News

USD/JPY drops to fresh daily low, around mid-129.00s post-US PCE Price Index

USD/JPY drops to fresh daily low, around mid-129.00s post-US PCE Price Index

The USD/JPY pair remains depressed through the early North American session and drops to a fresh daily low, around mid-129.00s following the release of the US macro data.

USD/JPY News

Gold struggles to hold above $1,930

Gold struggles to hold above $1,930

Gold price has lost its traction and declined below $1,930 during the American trading hours. The benchmark 10-year US Treasury bond yield clings to modest daily gains above 3.5% ahead of the weekend, not allowing XAU/USD to gain traction.

Gold News

WTI grinds higher past $81.00 on softer US Dollar, cautious optimism over future oil demand

WTI grinds higher past $81.00 on softer US Dollar, cautious optimism over future oil demand

WTI crude oil price print mild gains as bulls and bears jostle around $81.30 during the third positive day on Friday morning. The black gold portrays the market’s cautious optimism surrounding the future energy demand, as well as cheers the US Dollar weakness, while waiting for fresh clues.

Oil News

Interest Rates

Inflation

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