ForexLive Americas FX news wrap: Bond meltdown hits everything
Forex news for New York trade on February 25, 2021:
- US weekly initial jobless claims 730k vs 825k expected
- US January prelim durable goods orders +3.4% vs +1.1% expected
- US Q4 GDP (second reading) +4.1% vs +4.2% expected
- US January pending home sales -2.8% m/m vs 0.0% expected
- US sells 7-year notes at 1.195% vs 1.151% WI
- Fed's Williams: Committed to using full range of tools to assure that recovery will be as robust as possible
- Fed's Bostic says 'I am not worried' about move in yields
- Fed's Bostic: Recovery in a 'rough patch' but outlook for jobs not totally gloomy
- Fed's Bullard: Even with optimism, it's too early to discuss changes in Fed's bond purchases
- Fed's Bullard: Rise in yields "appropriate" given improving growth and inflation
- ECB's de Guindos: First half growth will be a little bit weaker than we projected
- Fed's George: Much of the increase in yields reflects growing optimism in the strength of the recovery
- CHF leads, AUD lags
- S&P 500 down 96 points to 3829
- US 10-year yields up 15 bps to 1.52%
- US 5-year yields up 22 bps to 0.81%
- Gold down $35 to $1769
- WTI crude up 26-cents to $63.49
The bond market is putting pressure on just about everything else. Yields ticked higher Thursday and that weighed heavily on stocks once again but things really began to move after a huge tail in the 7-year auction. That led to a puke out of bonds that spilled over to stocks and FX.
The dollar was heavily bid in the second half of the day leading to sharp reversals in commodity currencies from multi-year highs. CAD hit a three-year high after strong US durable goods data but completely reversed afterwards even with Canadian yields rising in step (if not more) than their US counterparts.
The market will be on high alert for some kind of soothing words from the Fed in the day ahead but there's also a fair argument that month-end rebalancing could push down yields and that convexity hedging exaggerated today's move and may have led to a blow-off top.
The euro and sterling held out through London trade but busted afterwards, falling to 1.2177 and 1.4000, respectively. Sterling had earlier risen as the UK rates market priced out BOE cuts.