The correction may be over for now

The exit from the “reflation trade” continued yesterday with a strong decline in equities and new lows for bond yields (1.25% for the US 10y). China fueled growth fears by signaling it could ease its policy very soon again. But the trend seems to be reversing (1.33% now): the sharp fall in bond yields has likely been amplified by technical factors and fears about the impact of the Delta variant on growth exaggerated.

us 10y bond yield

The ECB unveiled the outcome of its strategic review yesterday and conformed that the inflation target would now be 2% instead of “below but close to 2%”. Like the Fed, the ECB will also tolerate temporary overshooting and asset purchases will now include climate change criteria. The rebound in the EUR/USD that followed the announcement was likely a classic “buy the rumour, sell the fact” move. EUR/USD edged down again overnight to trade around 1.1830 now.

The economic agenda is light today. As explained above, the reflation trade could pick up some steam today.

Share this news :

You might also read :

ES-oil
June 15, 2021

US cracks ease, on biofuel mandate waivers

ICE Brent prompt contract remained relatively stable at 73.2 $/b, US product markets were under pressure as the Biden administration considered biofuel blending mandates waivers…
ES-gas
July 7, 2021

Strong downward correction

European gas prices dropped significantly yesterday, pressured by below-normal demand and technical correction, which outweighed the impact of lower Russian supply. Indeed, due to maintenance…
Join EnergyScan

Get more analysis and data with our Premium subscription

Ask for a free trial here

Subscribe to our newsletter

Don’t have an account yet? 

[booked-calendar]