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.
Latest Latest Bonds & Interest Rates Analysis
Editors' picks
EUR/USD nears 1.0800 on broad US Dollar weakness
Optimism continues to undermine demand for the American currency ahead of the weekly close. EUR/USD hovers around weekly highs just ahead of the 1.0900 figure.
GBP/USD reconquers 1.2500 with upbeat UK GDP
Following BOE-inspired slump on Thursday, the British Pound changed course and trades around 1.2530. Better-than-anticipated UK GDP and a weaker USD behind the advance.
USD/JPY moves above 155.50 due to the firmer US Dollar
USD/JPY gained ground due to the recovery in the US Dollar on Friday. Japan’s Current Account Surplus was lower than market expectations, weakening the Japanese Yen. US Initial Jobless Claims rose to an eight-month high of 231K, surpassing estimates of 210K.
Gold resumes advance and trades above $2,370
XAU/USD accelerated its recovery on Friday, as investors drop the USD. Dismal US employment-related figures revived hopes for a soon-to-come rate cut from the Fed.
Oil Price Analysis: Falling in a channel over the short-term
Oil is falling in a descending channel on the short-term horizon. Within the channel it is currently correcting higher, however, it is likely to capitulate and resume its downtrend. Only a decisive break out of the channel would reverse the short-term bearish outlook.