US session funda wrap: US yields are the driving force, dollar highest since Jan

From a fundamental perspective, US yields have been the driving force, sending stocks on Wall Street lower for the third session on fears of the return of inflation with geopolitical risks simmering the background. Gold is lower and the DXY is up to test the 91 handle and to the highest level since Jan earlier this year.

The US 10-year yields have moved in on the 3% psychological target and the highest level since Jan 2014 at 2.998% the high - this has prompted some consternation on Wall Street, as investors fret about what this dynamic of government bond yields climbing and the subsequent shrinking gap between short-term and long-term rates, (the curve was at its narrowest point of just 41 percentage points between the 2 and 10yrs last week), means for U.S. economic growth - a flattening curve is read as a sign that investors are worried about the longer-term outlook.

It was recently that non-voting member St. Louis Fed President James Bullard was saying the yield-curve signal should be taken seriously and that If the central bank goes ahead and raises rates and the 10-year rate “does not cooperate,” the yield curve could invert later this year or in 2019. 

Meanwhile, trade, oil, Washington, Central Banks and geopolitical headlines are all up for grabs and will be rolling through as the week progresses, with a  particular focus on the ECB later this week. Key headlines of such nature today as follows, (sources: LiveSquawk):

• BoC Poloz: increase in job vacancies symptom of a strong jobs market
• -also a symptom of skills mismatch
• -over this year inflation will be above 2 pct because of temporary factors like energy costs, those things will come out over the year
• BoC Poloz: the economy is about 50pct more sensitive to interest rates
• BoC Wilkins: signs speculation is declining in a housing market
• Mexico's foreign min: unacceptable to condition NAFTA on the immigration issue
• Mexico president: it is possible to overcome differences on NAFTA
• Eu said to be seeking to join US/China trade dispute at the WTO
• ECB's Coeure: a cooperative approach to CCP recovery and resolution
• Bundesbank report: German boom to continue despite weaker q1 growth
• Germany said to want to aid UK banks on post-Brexit EU access
• BoJ's Kuroda: risks are tilted to the downside on inflation
• Iran: no need to extend OPEC, non-OPEC pact if crude oil prices rise
• WH spokeswoman Sanders: will not lift n.Korea sanctions before concrete actions
• BoJ Kuroda: world economic growth likely to accelerate - CNBC interview
• WH spokeswoman Sanders: the goal on N.Korea is denuclearization
• US acting sec of state Sullivan: trump wants stronger Iran nuclear deal if possible
• US acting sec of state Sullivan: us has significant concerns with Iran
• EU’s Barnier: sees good progress on orderly UK withdrawal from EU
• EU’s Barnier: Brexit will note make EU compromises its basic principles
• BoC Wilkins: we believe real estate markets are rebounding