- US 10-year Treasury yields remain pressured after dropping the most since late February.
- Downbeat US data, covid woes weigh on sentiment.
- FOMC minutes, ECB emergency meeting eyed, risk catalysts keep the driver’s seat.
US 10-year Treasury yields extend the latest bear moves around 1.35%, down 1.5 basis points (bps), amid early Asian session on Wednesday. The bond coupled plummeted the most since February 26 the previous day as the US traders returned from a long break.
The coronavirus (COVID-19) headlines and soft US data renew market fears over another economic downplay. Also backing the moves could be the lack of major data/events and cautious mood ahead of today’s Federal Open Market Committee (FOMC) Meeting Minutes, as well as Thursday’s surprise ECB meeting.
The covid variants and their resistance to vaccines have led to fresh pandemic fears of late. This becomes an additional worry for the developing economies, also some in the developed ones like Australia, where jabbing is slow.
On the other hand, the US ISM Services PMI eased below 63.5 forecast and 64.0 prior to 60.1 in June. The figures followed mixed US employment data, published Friday, to probe the Fed hawks. However, the economics couldn’t favor the market optimists amid covid resurgence. It’s worth noting that the sluggish US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, also weigh on the sentiment.
Elsewhere, the US-China tussles, Brexit and the White House’s push for global help to developing nations entertain short-term traders ahead of the key FOMC Minutes and a special meeting of the European Central Bank (ECB).
While the FOMC Minutes will be closely watched for details of the policymakers’ divide, the ECB is widely expected to keep easy money but the status of the meeting is a surprise and requires the traders’ caution.
Overall, the wave of central bankers’ rush towards tapering and rate hikes seems to have faded of late, despite the RBA’s hawkish tilt. However, bulls aren’t out of woods and keep the markets on edge.
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