Bond yields have resumed a fledgling rising trend - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the bond yields may have resumed a fledgling rising trend, supported by the BoJ’s ‘Yield Curve Control’ and notions of ECB tapering that stem from the same concern that flat yield curves are bad for the financial sector and may be counter-productive.

Key Quotes

“GBP has finally and belatedly responded to the heightened and prolonged Brexit uncertainty, notwithstanding a resilient UK economy and prospects of significant UK fiscal stimulus.  The outlook remains negative, but it is risky to jump on the selling bandwagon. 

Higher yields are also supported by increasing expectations of more fiscal stimulus and firming commodity prices related to modest improvement in global economic activity.  Yields may be rebounding from extraordinary lows generated by fear of a shortage of bonds to feed QE programs, and depressed views on inflation and secular stagnation. 

Gold has broken key support, weighed down by rising bond yields and firming confidence in global growth.  JPY has also broken a year-long downtrend and combined with weaker trends in gold and GBP is spilling over to broader gains in the USD, even though US economic data has been mixed. Vague ECB taper talk has added uncertainty.  It may tend to reinforce a rise in yields, but threatens to turn what was a constructive market to one that is more risk-averse.”