Risk Trades higher Today, With 10-Year Treasury Yields Retreating From Above 5.00%
Today there was some comfort during the session since the crisis in the Middle East did not worsen over the weekend, which reversed the safe haven trade that we have seen in the last few weeks. Flows reversed out of safe havens and into risk currencies as stocks increased by the smallest amount and bonds were also provided. In addition, gold and oil witnessed weaker holds prior to the opening in Europe.
When the European session started, attention shifted to the bond market, with the 10-year US bond yields rising above 5%, touching 5.024% to levels not seen since 2007. The increase was short-lived though, as yields have now retraced to about 4.90%. The increase in rates puts pressure on equities, causing the S&P 500 futures to drop by 0.7% at one point, although stock markets are also recovering in the US session.
But outside of stocks, there wasn’t much of a response as rates approached 5%. Gold recovered some of the earlier losses it had suffered along with crude oil, and it is now back up to $1,977 from a low of $1,964 in the Asian session. The Euro, JPY, and GBP all traded flat versus the US dollar for most of the European session, but have made a move to the upside as soon as the US session opened, while the USD is feeling some pressure.
With the pair continuing to stay just around the 150.00 level, the USD/JPY in particular looks to be holding back dollar bulls, making it one to keep an eye on. Wall Street is now in charge of handling the bond market, and as rates retreat after hitting 5%, it might result in a further weakening of the USD.
Gold XAU Live Chart
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