All eyes are on U.S. Treasury Bonds – Market Overview

By: Miguel A. Rodriguez

17:17, 09 March 2021

1615291600.png
Yesterday, yields of U.S. Treasury Bonds hit new highs, with the 10-year benchmark surpassing the 1.60% mark. Today's session saw it fall to 1.53%.

In this sense, it will be crucial to follow the auctions that will take place today with a 3-year bond auction and especially tomorrow with a 10-year bond auction.

Suppose the demand for these auctions is not high enough to push down the yields, and they continue on this trend. In that case, the market could return to the dynamics experienced yesterday with downward pressure on stock indices and a strengthening of the U.S. Dollar.

Meanwhile, the markets experienced corrections from yesterday's movements.

The U.S. Dollar strengthened, and its price against the euro exceeded the 1.1900 zone after having touched a minimum of 1.1830 yesterday.

From a technical analysis perspective, EUR/USD broke lower after trading below the 100-day SMA line, currently located at 1.2030, but rebounded. The daily RSI reached the 30 zone, a level that had not been seen since March 2020. The rebound also comes from a wide price concentration zone between 1.1750 and 1.1870.

Therefore, it could perhaps be considered a purely technical correction without the fundamental data has changed substantially. There are fundamental causes that might generate pressure on the euro, such as the ultra-expansive monetary policy of the European Central Bank, which not only remains in place but could grow stronger if the outflows of European bonds that we have witnessed in previous days should intensify. Additionally, there have been talks in the market about the ECB increasing the pace of asset purchases, which has not been officially confirmed.

On the other hand, today, the fourth quarter's GDP data for the Euro Area was published, showing a year-on-year fall of 4.9%, somewhat better than the expected -5% figure.

Together with other fundamental factors, this data contributed to a rise in European Stock Indices, which perform better than the North American ones, breaking the correlation that they have traditionally experienced in recent months.

The fact that inflationary expectations in Europe are not as high as those in the United States and that the levels of European bonds yields have not experienced such high increases, together with expectations of a recovery in the economy due to the administration of vaccines and implementation of the Next Generation aid package are the main reasons for this behaviour.

Elsewhere in Germany, DAX has reached a new all-time high in the 14452 zone and technically does not find any benchmarks that can be considered resistance with RSI levels relatively below overbought levels.

Sources: ForexLive.com, Investing.com.

Share this article

This information prepared by capex.com/za is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation, or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of capex.com/zaJME Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.