ECB Steals CB Watcher’s Spotlight From Fed

Market-watchers are parsing the Federal Reserve’s every word for clues about where bond yields are headed, but the European Central Bank (ECB) may be in the driver’s seat.
“Monetary policy development in the euro zone remains a critical factor in projecting the forward path of global long-term bond yields, especially since quantitative easing appears forthcoming,” DBS said in a note Wednesday. It noted that global 10-year government bond yields have largely trended downward this year, with the biggest declines coming from euro zone economies.

“Even as the market expects U.S. [interest rate] hikes to draw closer, the decline in 10-year yields across the developed world has dragged down 10-year Treasury yields,” it said.

The U.S. stock markets rallied to record highs this week, but while that would traditionally signal an exit from safe-haven assets such as Treasurys, yields barely budged — even as Fed chief Janet Yellen made slightly more hawkish comments at the Jackson Hole meeting of central bankers last week.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza