The second half of 2021 started with a relentless bid into bonds. Tuesday’s volume showed nearly double the normal volume into US 10 year bonds and the reason was far from clear. Are bonds being bought on variant concerns? Is the Fed’s latest shift to bond tapering considered to be too early? Is it just foreign demand for bonds and a rotation out of equities which have enjoyed a really good first half of the year? Whatever the reason the message for investors is clear, ‘watch out for the unexpected in the second half of 2021!’

Other key events from the past week

  • AUD: RBA interest rate decision, July 06: The RBA were optimistic this week and said that wage data would be very important going forward. The RBA had rising wages as a prerequisite for rising interest rates! Watch labour data closely!
  • Bitcoin: Still holding $30,000, July 07: As long as the $30,000 key level holds we can expect an accumulation of buy orders. If $30,000 does break then the next major supports sits lower at $20,000 and the daily ascending trend line.
  • USD: FOMC minutes, July 07: The FOMC minutes were hotly anticipated this week to answer one question, ‘are the Fed serious about bond tapering?’ The answer was ‘yes, they are’, but the timing for tapering is not imminent. This resulted in some moderate USD selling as USD bulls were initially disappointed.

Key events for the coming week

  • CAD: BoC rate decision, July 14: The Bank of Canada surprised markets and tapered bond purchases in April. Will they surprise again next week?
  • Seasonal trades: Find a trade, July: This week Deutsche Post raises FY21 guidance and that lifted share prices on the release. The 2021 EBIT is now expected to be more than 7 bln euros. Check out the strong seasonal pattern here.
  • NZD: Inflation data, July 16: Three investment banks projected that the RBNZ would raise rates in November of this year. Will inflation pressure add to those calls for higher New Zealand interest rates and send the AUDNZD lower?

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