GLOBAL BOND MARKETS


China: Feeling worse but looking better in July – Standard Chartered


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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 turns south towards 1.0200 amid risk-aversion

EUR/USD turns south towards 1.0200 amid risk-aversion

EUR/USD is heading south towards 1.0200 in early Europe, as bulls failed to keep reins near the monthly high. Mounting US-China tensions over Taiwan and recession fears weigh on risk sentiment and help the dollar find demand as a safe haven.

EUR/USD News

GBP/USD tests 1.2200 as risk-off flows dominate

GBP/USD tests 1.2200 as risk-off flows dominate

GBP/USD is trading deep in red near 1.2200, as investors turn away from higher-yielding assets such as the GBP. Despite falling US Treasury bond yields, the dollar manages to gather strength amid risk aversion. US Pelosi's visit to Taiwan is the main event risk this Tuesday. 

GBP/USD News

USD/JPY finds support near 130.40 on Japanese jaw-boning

USD/JPY finds support near 130.40 on Japanese jaw-boning

USD/JPY is rebounding towards 131.00, having found support near 130.40 after the Japanese Finance Minister expressed concerns about the rapid moves in the yen. Risk-aversion combined with the sell-off in the US dollar and yields keep the downside intact in the pair. 

USD/JPY News

Gold bulls keep their sight on $1,786 amid Taiwan tensions

Gold bulls keep their sight on $1,786 amid Taiwan tensions

Gold price eases but upside remains favored amid escalating US-China tensions. The expected visit of US’ Pelosi to Taipei rattles markets amid China warnings. Gold bulls remain on track to test the critical resistance area at $1,786.

Gold News

WTI: Sellers in the driving seat around $93.00

WTI: Sellers in the driving seat around $93.00

WTI crude oil prices remain depressed after breaking the one-month-old symmetrical triangle to the south. That said, the black gold holds lower ground near $93.00, the lowest levels in two weeks, during Tuesday’s Asian session. Given the bearish MACD signals joining the triangle’s breakdown, the commodity prices are likely to decline further.

Oil News

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