Bad news = good news for the markets at the moment as investors just don’t want to see another hot labour market data. Yesterday’s US ADP employment is lower than estimates while ISM services new orders index slowed sharply. That provided some stabilisation to the bond rout. That said, bond vigilantes are in full force and investors are now demanding higher compensation to hold longer dated government bonds.
Unless the US economy slows sharply, rate cuts are premature so bond yields will remain at elevated levels that pose risks of breaking something. We are likely to be in a prolonged environment of rate and cross asset volatility.
I am delighted to be on Sky News this morning to share our thoughts on the latest market developments. We also touched on Japan where yen weakness is prompting speculation of intervention and eventual exit of its yield curve control policy, which artificially suppressed JGB yields.
YouTube link here (my segment starts from 13:46) https://lnkd.in/eK2nqHs7
