Prospects for Bond Yield Market
2023-05-25
■US treasury bond bonds: exploring the appropriateness of postponing interest rate increase to interest rate reduction
■Eurozone government bonds: Declining demand for safe assets will support government bond yields
The 10-year government bonds continued to decline (with higher yields). The yield of US 10-year treasury bonds rose at the beginning of the week due to the issuance of large corporate bonds, and then increased due to the improvement of retail and other economic indicators. Hopes for a debt ceiling agreement intensified in the middle of this week, but concerns resurfaced over the weekend.
There is still significant disagreement between the Democratic Party and the Republican Party on the debt ceiling issue, and it is unclear whether the US House of Representatives can vote on this issue within this week. This week, the minutes of the Federal Open Market Committee (FOMC) meeting (May 2nd and 3rd) are likely to explore the appropriateness of temporarily raising interest rates after June and lowering interest rates in the second half of the year. However, since the banking crisis in March, the yield of 10-year US treasury bonds has been fluctuating at about 3.5%, and the upward momentum of yield may gradually stagnate.
Germany's 10-year government bonds fell for the first time in four weeks (with yields rising). Until the middle of the week, the trend of the interest rate increase in the United States was intertwined with the improvement of economic indicators in the United States and the deterioration of economic indicators in the euro area, and the yield of German 10-year treasury bonds was looking for a sense of direction. Afterward, influenced by optimistic sentiment about the US federal debt ceiling issue, the trend of interest rate hikes in the US intensified, with yields reaching their highest level since April 24th.
The yield continues to hover between the April high (2.54%) and low (2.12%), but market risk sentiment has eased due to excessive pessimism, and demand for safe-haven assets has subsided. It is expected that the yield will perform strongly this week. But in order to break through the April high (2.54%), it is necessary to alleviate the uncertainty of the future of the eurozone economy. Therefore, focus on the initial value of the eurozone comprehensive PMI and the German Ifo business climate index.
■Eurozone government bonds: Declining demand for safe assets will support government bond yields
The 10-year government bonds continued to decline (with higher yields). The yield of US 10-year treasury bonds rose at the beginning of the week due to the issuance of large corporate bonds, and then increased due to the improvement of retail and other economic indicators. Hopes for a debt ceiling agreement intensified in the middle of this week, but concerns resurfaced over the weekend.
There is still significant disagreement between the Democratic Party and the Republican Party on the debt ceiling issue, and it is unclear whether the US House of Representatives can vote on this issue within this week. This week, the minutes of the Federal Open Market Committee (FOMC) meeting (May 2nd and 3rd) are likely to explore the appropriateness of temporarily raising interest rates after June and lowering interest rates in the second half of the year. However, since the banking crisis in March, the yield of 10-year US treasury bonds has been fluctuating at about 3.5%, and the upward momentum of yield may gradually stagnate.
Germany's 10-year government bonds fell for the first time in four weeks (with yields rising). Until the middle of the week, the trend of the interest rate increase in the United States was intertwined with the improvement of economic indicators in the United States and the deterioration of economic indicators in the euro area, and the yield of German 10-year treasury bonds was looking for a sense of direction. Afterward, influenced by optimistic sentiment about the US federal debt ceiling issue, the trend of interest rate hikes in the US intensified, with yields reaching their highest level since April 24th.
The yield continues to hover between the April high (2.54%) and low (2.12%), but market risk sentiment has eased due to excessive pessimism, and demand for safe-haven assets has subsided. It is expected that the yield will perform strongly this week. But in order to break through the April high (2.54%), it is necessary to alleviate the uncertainty of the future of the eurozone economy. Therefore, focus on the initial value of the eurozone comprehensive PMI and the German Ifo business climate index.