Chart of the day: Surprising push lower in US10Y continues...
The recent economic data out of the US was nothing short of spectacular, with ISM Mfg PMI printing at the highest level since 1983, with NFP showing close to a million jobs gained in March and ISM Services PMI printing the highest number going back as far as our dataset allows.
These types of numbers were a very good example of the type of solid economic beats that market participants are expecting going into Q2. It’s also solid prints like these that are expected to see US10Y pushing higher.
However, despite the data, US10Y has been pushing lower over the past few sessions, currently meandering close to the next key area of support between 1.60 – 1.62.
So, what to make of this drop in US10Y? For now, not much as the med term bias remains tilted to the upside for yields, especially going into the second quarter of the year. What would change that med term view?
Firstly, a drastic deterioration in the actual Q2 data which sees the market second guess it’s baseline assumptions. Secondly, a drastic deterioration in the virus situation, bad enough to overshadow the current flurry of positive drivers in the market right now.
Thus, the expectation for higher yields in the med term remains intact and we are looking at key support zones (1.60 – 1.62 and 1.50 – 1.52) as possible areas where we could expect med term bond sellers to step back in.
These types of numbers were a very good example of the type of solid economic beats that market participants are expecting going into Q2. It’s also solid prints like these that are expected to see US10Y pushing higher.
However, despite the data, US10Y has been pushing lower over the past few sessions, currently meandering close to the next key area of support between 1.60 – 1.62.
So, what to make of this drop in US10Y? For now, not much as the med term bias remains tilted to the upside for yields, especially going into the second quarter of the year. What would change that med term view?
Firstly, a drastic deterioration in the actual Q2 data which sees the market second guess it’s baseline assumptions. Secondly, a drastic deterioration in the virus situation, bad enough to overshadow the current flurry of positive drivers in the market right now.
Thus, the expectation for higher yields in the med term remains intact and we are looking at key support zones (1.60 – 1.62 and 1.50 – 1.52) as possible areas where we could expect med term bond sellers to step back in.