Stock Traders Look to Bond Yields For Direction

Stock traders will be watching a brief flurry of economic reports Thursday, but the main attraction could be the bond market.

Reputed to be dull, bonds have been anything but this week. Caught in a tug of war between the opposing policy modes of a tightening U.S. Fed and an easing European Central Bank, bond yields have taken dramatic turns as investors also adjust portfolios ahead of month’s end.

While the S&P 500 broke through the 2,000 mark for the first time, bond traders this week have been watching yields creep ever lower in Europe, with yields on shorter duration sovereign debt from Germany and Belgium to the Netherlands and Finland turning negative. The benchmark German 10-year bund fell through 0.90 percent for the first time Wednesday, while Italian and Spanish 10-year yields traded beneath the U.S. 10-year yield. It was not that long ago that those peripheral euro zone securities were seen as risky high yielders.

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