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 propped up near 1.0750 ahead of European Retail Sales
EUR/USD churned around 1.0770 to kick off the new trading week, with the pair rising after better-than-expected Purchasing Managers Index figures early Monday before settling into familiar chart territory above 1.0750 ahead of Tuesday’s pan-European Retail Sales figures.
GBP/USD extends the rally above 1.2550, eyes on BoE rate decision
The GBP/USD pair trades in positive territory for the fifth consecutive day near 1.2560 during the Asian session on Tuesday. The weaker US Dollar provides some support to the major pair. The Bank of England interest rate decision on Thursday will be in the spotlight, with no change in rate expected.
USD/JPY extends recovery above 154.00, focus on Fedspeak
The USD/JPY pair trades on a stronger note around 154.10 on Tuesday during the Asian trading hours. The recovery of the pair is supported by the modest rebound of US Dollar to 105.10 after bouncing off three-week lows.
Gold price extends recovery as markets react to downbeat jobs data
Gold price extends its recovery on Tuesday. The uptick of the yellow metal is bolstered by the weaker US dollar after recent US Nonfarm Payrolls (NFP) data boosted bets that the Federal Reserve would cut interest rates later this year.
Crude Oil continues to soften on Middle East ceasefire talks, WTI falls to $78
West Texas Intermediate (WTI) US Crude Oil futures fell on Monday after headlines of a possible ceasefire in the ongoing conflict between Israel and Palestinian Hamas. Crude Oil markets will also be keeping an eye out for weekly production updates from the US as output threatens to outpace demand.