Yield Worries Crash Wall Street
Rowan Crosby • 2 min read
Markets have fallen away sharply during the US session as recession fears have prompted broad-based selling of risk assets.
The worries started on the back of the US yield curve inverting. This occurs when demand for longer-dated bonds is higher than that of the shorter-dated bonds. That pushes the yield down on the longer-dated bonds (such as the 10-year), as investors pile into the safer long-term plays because of the fear surrounding the current state of the economy. Interestingly the yield on the 30-year sits at 2.0% which is a worry if that’s where you want to park your money for the next 30-years.
The USD also saw inflows today and is back trading just under the 98.00 level.
The moves in the yield curve prompted US President Trump to come out and take another swipe at the Fed and Jerome Powell by saying, “the Federal Reserve acted far too quickly, and now is very, very late”, before adding, “Too bad, so much to gain on the upside!”
The SPX was hit hard and finished the session down -2.93% while the safe-haven assets like GOLD all performed strongly with the yellow metal closing the session back towards the $1520 level.
Risk currencies like the Aussie got hit hard while the USD/JPY finished the session just under the 106.00 mark.
Asian Market Outlook
Today there is some pretty major data out of Australia by way of the employment report. As mentioned the AUD/USD got whacked overnight and is currently under the 0.6750 level, sharply down from 0.6800 that has been a great resistance level for us.
The jobs number today will be vital, with a fair bit of attention on the jobless rate which is currently 5.2%. The RBA would love a drop in this number, but if we don’t start seeing some improvement here the Aussie could tank.
We’ve been getting a fair bit of back and forth in Asia lately, so while markets were very soft overnight, there is a chance of a bounce, particularly if jobs come in better than expected.