2yr Yields Are Trading

Forex News and Events: Asian session was quiet as markets began bracing themselves for tomorrow's ECB meeting. Risk appetite was muted as equity indices painted a mixed picture. EURUSD provided a solid U-shaped path trading from 1.2770 to 1.2730 then back to 1.2780. The correlation between EURUSD and its interest rate differential remains high so any directional price action will probability wait till tomorrow ECB meeting. German GDP 2011 printed in line with expectations at 3.0% y/y vs 3.6% prior read. The German newspaper A Die Welt reported on Italian PM Monti's wishes for lower interest rates from the EU. Monti also mentioned that the EU crisis is not due the poor structure of the European Union, but instead was caused by the US. Comments from San Francisco Fed President John ...

Forex News and Events: Trading remains subdued as the holiday season has fully entrenched the market psyche. With headline news absent and scheduled economic data 2nd tier at best, price action has lacked any directional conviction. What movement we did see, was a general movement toward risk-off fashion. FX flows were extremely light in Asian sessions, as the EURUSD traded up to 1.3077 from 1.3034, while USDJPY was stuck in 16 pip range between 78.04 and 77.88. Gold was softer following the trend in regional equity indices, trading from $1611 to $1591 (there was lingering chatter of widespread liquidation to cover losses in other markets). German 2yr bunds yields fell below .20% for the first time ever and US 2yrs yields were trading at 0.28%, indicating that yield differentials are ...

Forex News and Events: With the markets completely focused on events in Europe, headlines continued to define FX trends. Risk currencies rallied as there is hope that this week’s EU meeting will bring some solid announcements. A large part of the shift in risk sentiment was due to the speculation that the IMF is considering a financial aid package for Italy. EURUSD was able to rally off the 1.3286 low to 1.3398 while USDJPY trade up to a high of 78.29. Asian regional indices are all trading higher with the Nikkei up 2.03% and Hang Seng up 1.38%. European yields contracted with big drops in Italian and Spanish government bonds. Overnight, comments from the rating agencies did take some of the steam out of the current rally. French news reported that S&P could change Frances outlook to ‘ ...

Forex News and Events: Headlines remain the primary driving force in FX markets. Rumors that the IMF was preparing a plan to lend Italy €600bn gave risk appetite a boast in Asian trading. However, Dow Jones has stated that unnamed IMF officials have denied the package. Asia regional indicates were strong across the board with the Hang Seng up 1.97% and the Nikkei up 1.56%. EURUSD was able to stage a mild rally off the 1.3220 floor to 1.3330 while AUDUSD was the other big winner rallying to 0.98789 from 0.9740. In other rumors, there was buzz that German and French talks have culminated in the accelerated fiscal integration and joint bond issue. While the integration speculation is still on the table, German government sources have rejected their participation in Eurobonds. For today ...

Forex News and Events: Sentiment remains weak in Asia, as traders unwind risk positions ahead of the long weekend. Heavy selling in the short-end of the European yields curve as Europe opens. Dark clouds linger over Europe as the German Chancellor Merkel, French President Sarkozy and Italian Prime Minister Monti’s meeting ends with no crisis fighting initiatives announced. In addition, Merkel went on to spook the markets by reiterating Germany’s stance that backing a Eurozone bond would send the "wrong signal" and continued to reject the concept of the ECB as lender of last resort. Her words triggered a broad rush out of European assets which continues into today. In thin volumes, EURUSD fell from 1.3354 to 1.3299, while GBPUSD dropped from 1.5500 to 1.5447. After a Gold pm Fix at $1695, ...

Forex News and Events: Trading remains dominated by random headline reports making FX trading volatile and prone to sudden reversals. The selloff in risk correlated trades has been driven primarily by heavy barrage of warnings that expectations for a grand solution at this weekend summit were overdone. In addition there is mounting reports that even if policy makers wanted to make a deal they lack the integration to execute a grand solution. Media outlets are reporting that the fund being made available to recapitalize banks could end up being less the €100bn and legal issues might stop having the EFSF directly guarantee sovereign debt. In addition, as rumor that emergence talks between French President Sarkozy, German Chancellor Merkel and the heads of the IMF and ECB have stalled. ...

Forex News and Events: Risk appetite came back marginally in Asian session, giving EUR and equity indices a boost. EURUSD traded up to 1.4200, while the Nikkei rose 1.17%. The rally in sentiment has been equated to President Obama's praising the Gang of Six Senate proposal that could potentially resolve the issues around the debt ceiling. The proposal aims to raise the debt ceiling by $2.4trn, while reducing $3.7trn in deficits 2021. In theory this would cut the Debt-to-GDP ratio to 70%, although the required spending cuts and tax increases have yet to be determined. That said, the Shanghai composite, our “canary in the coal mine”, was lower by 0.10%. Clearly the markets liked the progress in removing the uncertainly around this issue. However, we suspect that the feel good atmosphere ...

FX Strategy Weekly Market Outlook = GBP/USD adrift, downside favoured A correction in government bond prices and resulting rise in yields on the back of positive global macro data caused JPY crosses to stall over the past week and helped commodity and higher yield AUD, NZD, and CAD to consolidate early September gains. The leadership contest in Japan takes place next week and could add to speculation of BoJ intervention if Ozawa replaces PM Kan. We have included two pages illustrating G10 currency performance during the last period of BoJ intervention in 2003 and 2004. Narrow trading ranges in EUR and GBP vs the USD belie a generally more volatile/averse profile for EUR and GBP crosses vs the G10 as investors re-adjust to developments in the EU periphery and growing signs of weakening ...

Markets seem to have shrugged off the disappointing US non-farm payrolls data, with equity and commodity prices rallying as yields slipped. Friday closed with the S&P up 0.3% and yield curve steepened further, with US 2yrs rates dropping 5bp. Comments from Fed's Bullard today gave risky assets a boost, as he noted major G10 economies monetary policies were to stay exceptionally loose for some time, while liquidity programs would not pose a risk to price stability. In this environment of choppy improvement of global economic data and commitment by central banks to keep rates on the low end, risk correlated trades should continue to perform well, especially within the commodity bloc and EM space. Interestingly, recent CFTC positing report showed a large increase in AUD long positions by 10. ...