STATE OF THE MARKETS

Stocks fall as yields spike. US stocks that made all time high earlier, fall back as Treasury yields spike, with the US10Y benchmark reached as high as 1.75% on Thursday. More than $690 billion flows into the US treasuries futures of various maturities as Dow (-0.46%), S&P500 (-1.48%) and Nasdaq (-3.02%) took a plunge. 

Crude plunged deeper in the red, to $60 from previous $64.60/bl on Dollar strength and as demand recovery was shattered by the new lockdowns imposed in certain part of Europe. Gold returned to under pressure as yields seeking investors ran to bond, settled the precious metal lower around $1,736.40/oz.

In the FX space, King Dollar regained the reign as it advanced further in the medium and long term accounts on the support of the safe-haven Swiss and Yen. Other than Loonie, the Comdolls was sent to the back burner across the board as fear of rising yields returned to the scene. Sterling continues to overbid Euro as the union currency lost bid across the board.

OUR PICK – No new pick

No new pick going into weekend. We have observed increased Yen flows over these few days and expect Yen pairs completing their top, which signaled potential negative sentiments coming in due time. Rising yields is not of Feds immediate concerns at this point and ECB pledge to accelerate money supply to contain rising yields signaled that the central banks may let inflation run hot for a while before pushing the brake.

Rising yields will continue to drive more investors to bonds especially SNB and BoJ that are on negative yields. But 1 to 5 years yields spreads still favors CAD at this point in time, so USD strength as far as yields is concerned might still be limited, in our view.

Trades update: MO continues its upward trajectory despite equities sell-off, COG was stopped out at $18.40 after reached short-term TP1, USD/CHF remains active as it stays closed below 0.9280 but we may close going into weekend to reduce exposure, NIO sell limit @ 44.70 was filled late Wednesday and has reached short-term TP1, USD/JPY remains active as it closed below 109.00 and will ride the weekend. Have a good one!