GLOBAL BOND MARKETS


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THEMES AFFECTING Bonds



ISHARES GLOBAL UTILITIES ETF

ISHARES US UTILITIES ETF


Bonds as related to other asset classes

Bond prices and bond yields are many times the drivers behind price movements in currencies and other asset classes. In this section, we aim to explain how those movements are being perceived and traded by our dedicated contributors and in-house analysts.

Utilities are big borrowers and their profits are enhanced by lower interest costs. Conversely, the utility average tends to decline when investors expect rising interest rates. Because of this interest-rate sensitivity, the Utilities Average is regarded by some as a leading indicator for the stock market as a whole.

Utilities are part of our Risk-On/Off indicators you can find by clicking here.

Bond prices and bond yields trend in opposite directions. This is important for understanding most of the analysis and news published on this page.

It's also important to know the underlying dynamic on why a bond's yield is rising or falling: it can be based on interest rate expectations or it can be based on market sentiment -uncertainty- and a "flight to safety" to bonds which are traditionally considered less risky.

The rate of change of interest rates, either the target rate or market rates, is important because this causes either stocks or bonds become more attractive. When this happens prices will tend to trend as money flows from one vehicle to the other until the new relationship is adequantely reflected in prices.

Bonds and stocks are always competing for investor money, and less so commodities. These usually trend in opposite direction of bond prices (falling commodity prices usually produce higher bond prices, vice versa); therefore, commodities would trend in the same direction as interest rates.

US Treasuries explained

If you are trading USD based or quoted pairs, watch the US bond market since a movement in Treasury yields impacts the US dollar. The driver of many movements in Treasury yields are partly driven by comments from Fed officials, so pay close attention to any news coming from US monetary authorities. US stocks usually get a boost from rising bond prices (falling Treasury yields), specially in inflationary times. But if they don't, then it's worth looking for market sentiment and reasons why the equity markets appear to be taking a more cautious stance. US stocks prices can also rise with falling Treasury prices (with rising yields) during a deflationary environment. In this case stocks and interest rates rise together which spurs global demand for the US Dollar.

UK Gilts explained

Global bond prices tend to move in synchrony. But there are moments when a country's bond market experiences a sharper movement than other bonds markets. Sometimes it may be a currency movement: The Gilt is the 10-year benchmark in the UK fixed income market. It's correlation to the Sterling is usually positive and decoupling between both markets serves as an early alert that some Intermarket relationship has changed. Changes in foreign exchange prices can overwhelm relative return calculations for international investors buying Gilts as an investment. When stripped out the currency component, UK Gilts should still provide some return to investors otherwise other bond markets, Treasuries for instance, may become attractive.
It is also true that a prolonged trend in energy prices is also a factor to consider as it will affect inflation expectations and thereby BOE's monetary policies.

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Latest Bonds & Interest Rates Analysis


Latest Latest Bonds & Interest Rates Analysis

Editors' picks

EUR/USD targets the 1.0880 zone ahead of US, EMU data

EUR/USD targets the 1.0880 zone ahead of US, EMU data

EUR/USD kept the bullish bias well in place for the second session in a row, leaving behind the 1.0800 barrier and the key 200-day SMA (1.0790) prior to key data releases in the EMU and US on Wednesday.

EUR/USD News

GBP/USD consolidates its gains above 1.2580, all eyes on US CPI data

GBP/USD consolidates its gains above 1.2580, all eyes on US CPI data

The GBP/USD pair consolidates its gains around 1.2590 during the early Asian session on Wednesday. The major pair holds above the key 100-day Exponential Moving Average but remains capped under the 1.2600 hurdle.

GBP/USD News

USD/JPY extends its upside above 156.50 ahead of US CPI, Retail Sales data

USD/JPY extends its upside above 156.50 ahead of US CPI, Retail Sales data

The USD/JPY pair trades in positive territory for the fourth consecutive day near 156.55 on Wednesday during the Asian session. The uptick of the pair is bolstered by the speculation that the Federal Reserve might maintain rates higher for longer amid the elevated inflation.

USD/JPY News

Gold price firmer amid mixed US PPI data, Fed’s uncertain on inflation

Gold price firmer amid mixed US PPI data, Fed’s uncertain on inflation

Gold prices climbed past the $2,359 figure on Tuesday after data released by the US Department of Labor revealed that factory gate inflation rose above estimates, signaling that prices remained elevated. Despite that, US Treasury yields are sliding, a headwind for the Greenback.

Gold News

Oil hovers around $79.50 amid concerns of supply disruptions following Canada’s wildfires

Oil hovers around $79.50 amid concerns of supply disruptions following Canada’s wildfires

West Texas Intermediate crude Oil price trades around $79.50 per barrel during Tuesday's Asian session. These gains in Oil prices could be attributed to uncertainties surrounding crude Oil supply amid wildfires in remote western Canada.

Oil News

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