OfficailBLOG
  1. BigBoss
  2. blog
  3. Bond yields on fire once again after Powell’s dovish comments, driving USD up against major counterparts and dragging down equity markets

Bond yields on fire once again after Powell’s dovish comments, driving USD up against major counterparts and dragging down equity markets

BLOG March 5, 2021 at 06:28 am (GMT)
  • Surging bond yields dragged Asian stocks to one-month lows
  • OPEC+ to maintain the current supply level in April
  • USD up against EUR and JPY given Powell’s dovish comments

Asian stocks sank to one-month lows today as rising US Treasury yields again rattled equity investors, pushing the dollar to a three-month high at the same time. Australian stocks dropped more than 1%, Japan’s Nikkei dropped 1.6% and Seoul fell by 1.4%. These movements sent MSCI’s broadest index on APAC shares excluding Japan to 684.52, the lowest since February 1st.

Energy markets experienced a similar volatility, as oil prices adding big gains overnight after OPEC+ agreed to mostly maintain the current supply cuts in April while waiting for a more solid recovery in demand from the COVID. Previously, the market had been expecting them to ease the cuts by about 500,000 barrels per day from April, since inventories in the US are already dropping. But the decision to maintain the current level has, at least, boosted some hope on the economic strength of oil exporters as well as their local currencies.

USD soared strongly after Powell’s dovish comments at the Job Summit on Thursday. He said that the sell-off in Treasury bills was “notable and caught my attention” but was not “disorderly.” He expects the long-term rates to be safe enough to save itself from Fed’s intervention. Powell also reiterated the central bank’s commitment to maintain the ultra-easy monetary policy. These comments somehow reignited the selloff in Treasuries, driving the ten-year yield to reach over 1.5% again. Previously, the yield was at 1.614% as its three-month high. Strength on USD has also set other major counterparts to lose ground, and EUR and JPY are among the hardest hit. Currently USDJPY has passed the 107 level and reached above 108, the highest since July 2020.

At the same time, investors have not forgot about the giant stimulus package yet. It is widely expected that the Senate will approve the bill as most of the debate has concluded over the weekend. This will bring some worries over high inflation, adding to the optimism brought by the global rollout of vaccines.