- Surging bond yields are the key story right now - Hardy
- Any further rise could strongly affect JPY - Hardy
- Asian markets opened mixed following yesterday’s moves in bonds and stocks - Liu
- Today’s economic calendar does not have potential to move markets much - Hardy
- It does not need much inflation for dramatic moves in government bonds - Boye
- At one point rates might just have to normalise - Boye
By Clemens Bomsdorf
Moves in bond yields are playing a crucial role in current moves in the markets. "Surging bond yields are the key story right now, any further rise could strongly affect JPY," says John J Hardy, head of FX strategy at Saxo Bank
. For USDJPY 107.00 / 107.50 is the next step. Edmund Liu from Saxo's APAC Global Sales Trading reports from Singapore
that the USDJPY already "was given a shot in the arm" when the September Japanese CPI came in at annualised minus 0.5% - just as the previous month. This, underlines Liu, clearly increases monetary easing expectations. The Tokyo CPI figures for October, however, show a drastic turnaround, according to Hardy, which could mean inflation is on the way back. The Bank of Japan meeting is scheduled for Tuesday.
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The USD is still going strong as government bonds and US stocks fell. Technically speaking though the USD rally looks increasingly exhausting according to Liu. At least data today is not very likely to move markets as the calendar lacks heavily important numbers to be disclosed. Worth mentioning though are the US GDP revision as well as the preliminary German CPI figure. However, Saxo's fixed income trader Michael Boye
states, that in times as we are in now even smaller data could have a big impact.
Monday will bring the Eurozone’s flash CPI and as mentioned Tuesday the Bank of Japan meeting. The next very big event to come is the US presidential election beginning of November (Tuesday, 8). Friday in a week will bring US October changes in nonfarm payrolls.
Right now we could see that the „10-yr German yield blasted through the pre-Brexit level, which is quite a dramatic move. This happened as the UK GDP for the third quarter came in at 0.5% beating expectations of 0.3% and leading to a surge of 10 basis points in UK 10-yr government yields while German bunds moved almost the same. Last couple of days also futures moved fast. Concerning data Boye is of the opinion that "it does not need much evidence of inflation or global growth to pick up to see violent moves in government bond markets.“ At one point rates might just have to normalise.
Buyers' and sellers' markets do not seem to be the only concept... Photo: iStock