GLOBAL BOND MARKETS
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THEMES AFFECTING Bonds
ISHARES GLOBAL UTILITIES ETF
ISHARES US UTILITIES ETF
Bonds as related to other asset classes
Bond prices and bond yields are many times the drivers behind price movements in currencies and other asset classes. In this section, we aim to explain how those movements are being perceived and traded by our dedicated contributors and in-house analysts.
Utilities are big borrowers and their profits are enhanced by lower interest costs. Conversely, the utility average tends to decline when investors expect rising interest rates. Because of this interest-rate sensitivity, the Utilities Average is regarded by some as a leading indicator for the stock market as a whole.
Utilities are part of our Risk-On/Off indicators you can find by clicking here.
Bond prices and bond yields trend in opposite directions. This is important for understanding most of the analysis and news published on this page.
It's also important to know the underlying dynamic on why a bond's yield is rising
or falling: it can be based on interest rate expectations or it can be based on market sentiment -uncertainty- and a "flight to safety" to bonds
which are traditionally considered less risky.
The rate of change of interest rates, either the target rate or market rates,
is important because this causes either stocks or bonds become more attractive. When this happens prices will tend to trend as money flows from one vehicle to the
other until the new relationship is adequantely reflected in prices.
Bonds and stocks are always competing for investor money, and less so commodities. These
usually trend in opposite direction of bond prices (falling commodity prices usually produce higher bond prices, vice versa); therefore, commodities would trend in the same direction as interest rates.
US Treasuries explained
If you are trading USD based or quoted pairs, watch the US bond market since a movement in Treasury yields impacts the US dollar. The driver of many movements in Treasury yields are partly driven by comments from Fed officials, so pay close attention to any news coming from US monetary authorities. US stocks usually get a boost from rising bond prices (falling Treasury yields), specially in inflationary times. But if they don't, then it's worth looking for market sentiment and reasons why the equity markets appear to be taking a more cautious stance. US stocks prices can also rise with falling Treasury prices (with rising yields) during a deflationary environment. In this case stocks and interest rates rise together which spurs global demand for the US Dollar.
UK Gilts explained
Global bond prices tend to move in synchrony. But there are moments when a country's bond market experiences a sharper movement than other bonds markets. Sometimes it may be a currency movement: The Gilt is the 10-year benchmark in the UK fixed income market. It's correlation to the Sterling is usually positive and decoupling between both markets serves as an early alert that some Intermarket relationship has changed. Changes in foreign exchange prices can overwhelm relative return calculations for international investors buying Gilts as an investment. When stripped out the currency component, UK Gilts should still provide some return to investors otherwise other bond markets, Treasuries for instance, may become attractive.
It is also true that a prolonged trend in energy prices is also a factor to consider as it will affect inflation expectations and thereby BOE's monetary policies.
Latest Latest Bonds & Interest Rates Analysis
Editors' picks
EUR/USD finds demand above 1.0800 ahead of key US data
EUR/USD is finding fresh demand above 1.0800 in European trading on Tuesday. A minor improvement in the market mood offsets a pause in the US Dollar correction, offering support to the pair ahead of top-tier US economic data releases.
GBP/USD regains traction toward 1.3000 as risk sentiment improves
GBP/USD has regained upside traction, nearing 1.3000 in the European session on Tuesday. A positive shift in risk sentiment helps the pair recover ground amid bets for smaller Fed rate cuts, which checks the US Dollar correction ahead of key US jobs data and corporate earnings results.
Japanese Yen weakens below 153.00 against USD, remains close to multi-month low
The Japanese Yen surrenders modest intraday gains amid the BoJ rate-hike uncertainty. An unexpected dip in Japan’s jobless rate and intervention fears might limit JPY losses. Traders now await the BoJ and important US macro data before placing directional bets.
Gold price consolidates near record high, holds above $2,750 ahead of US macro data
Gold price maintains its bid tone through the early part of the European session on Tuesday and currently trades just above the $2,750 level, within the striking distance of the all-time peak touched last week.
WTI remains subdued around $67.50, pares losses as US plans for SPR purchases
WTI price recovers some of its daily losses as the US plans to purchase Oil for its Strategic Petroleum Reserve. The US announced to acquisition of up to 3 million barrels for delivery by May next year. Oil prices declined as limited military actions reduced concerns over a potential full-scale conflict in the Middle East.