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 stuck near midrange ahead of thin Thursday session
EUR/USD is reverting to the near-term mean, stuck near 1.0750 and stuck firmly in the week’s opening trading range. Markets will be on the lookout for speeches from ECB policymakers, but officials are broadly expected to avoid rocking the boat amidst holiday-constrained market flows.
GBP/USD holds below 1.2500 ahead of BoE rate decision
GBP/USD remains on the defensive around 1.2495 on Thursday during the early Asian session. Greenback edges higher for the third consecutive day, which weighs on the major pair. Traders turn to cautious mode ahead of the Bank of England interest rate decision later in the day, with no change in rate expected.
USD/JPY surges to near 155.50 as Fed expects to prolong policy rates
USD/JPY extends winning streak amid hawkish sentiment surrounding the Fed’s stance on monetary policy. Fed's Kashkari anticipates the prolonging of elevated rates and suggests that further rate hikes are not entirely ruled out. The Japanese Yen depreciated despite the potential for intervention by Japanese authorities.
Gold price drops amid higher US yields awaiting next week's US inflation
Gold remained at familiar levels on Wednesday, trading near $2,312 amid rising US Treasury yields and a strong US dollar. Traders await unemployment claims on Thursday, followed by Friday's University of Michigan Consumer Sentiment survey.
Oil erases intraday loss after draw down in Crude inventories
Oil nearly erases all intraday losses after EIA release. WTI Oil hangs around $78 after a dive to $76.76 earlier. The US Dollar Index ticks up with help from the Japanese Yen and market uncertainty.