We remarked on Monday’s notable calming in market circumstances, as volatility dipped, bond yields rose and risk was put back on again. A lot of that completely reversed early Tuesday, and even though there was something of a subsequent calming as the day progressed, a more menacing tone obtained overall. We’re left with the impression that the markets want this movie to play out a bit more before taking a conclusive stance. That’s probably fair. <\/p>\n
Ahead, we risk seeing bouts of flight to safety, pushing yields down. Don’t rule out a break back below 4% on the US 10yr, even if brief, likely on a risk-off episode should things turn really sour. This could see the 10yr Bund yield trekking back towards 2.5%. But as we look into the second quarter, we anticipate the US 10yr yield to get back up to the 4.3% area (a level that obtained for a period in January). That equates to the German 10yr yield getting back up to the 2.9% area. This reflects a resultant higher inflation narrative (higher energy prices). Beyond that, a subsequent calming in yields through the second half of the year would reflect the payment for that in terms of a hit to real growth. That’s the way we see it for now, and we’ll update as we progress through an uncertain number of weeks ahead.<\/p>\n
And for the Federal Reserve, the timing of the Warsh rate cuts will be pressured towards a wait. But they should still ultimately come, so long as medium-to-long term inflation expectations remain contained.<\/p>\n","protected":false},"excerpt":{"rendered":"We remarked on Monday’s notable calming in market circumstances, as volatility dipped, bond yields rose and risk was…\n","protected":false},"author":2,"featured_media":312563,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-312562","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/312562","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=312562"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/312562\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/312563"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=312562"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=312562"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=312562"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}