This week saw continued focus on the rise of global bond yields. US 10 year yields starting rising again midweek on both better than expected data and news that the US could vaccinate its population by May. This caused bond traders to expect a faster than forecast US recovery. The risk for equity markets is that a Federal Reserve that increases interest rates can pressure US companies. Rising interest rates may impact their ability to service existing debt, especially if the rises come too quickly. Equities may be under pressure in the near term if bind yields rise too far, too fast.
Other key events from the past week
- AUD: Interest rate, Mar 02. Interest rates (0.10%) and bond purchases (AUD$100 billion) remain unchanged. The RBA brought forward bond purchases in response to the rapidly rising bond yields & was prepared to do so again.
- US: Equities pressured, Mar 03. The sharp rise in US bond yields is weighing on US equities. A shortened three-month timeframe for the US to be back to normal raises questions about the speed of coming US rate hikes. This creates pressure for US stocks in the near term.
- BTCUSD: Bitcoin finds support, Mar 01. BTCUSD found support at the $44,000 level this week and institutional investors remain buying any dips. The move by PayPal to buy crypto custody firm Curv further underlines the growing investment fortune 500 companies are making into BTCUSD.
Key events for the coming week
- CAD: Interest rate, Mar 10. The BOC is expected to keep rates at their current level for the foreseeable future. However, the economic data out of Canada has been good recently, so investors will be looking at the rate statement for any clues about rate hikes. See the last meeting and the revised growth forecasts.
- EUR: Interest rate? Mar 11. The ECB is expected to keep rates unchanged, but the key focus will be on what they will do about rising bond yields. Will they allow yields to rise or will they either accelerate or expand their bond purchases?
- US: Bond yields, Mar 08. The key area to watch is how the US will respond to rising bond yields. If the Fed ignore the rising yields it will accelerate their rise and send the USD higher.