3 Jul 2013
Flash: Fundamental and technical gap portends growth? – Deutsche Bank
FXstreet.com (New York) - “Bulls would hope that the recently narrowing gap between the technicals and the fundamentals would continue to be eroded by a continuation in growth improvements.” suggests Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank.
However, “the test will be how economies react to the shock of recently rising yields, and to events in China and the rest of EM over the past few weeks. This might show up in the flash PMI numbers in 3 weeks so we shouldn't get complacent over yesterday's improvements. Nevertheless, markets have been becalmed for now with US yields stabilizing.” the analysts add.
Indeed, 10-year UST yields have range traded on either side of the 2.5% mark for more than a week and yesterday saw a continuation of this pattern. 10-year yields traded up to a session high of 2.55%, before the ISM print, and maybe the softer employment component, saw it come back in to close virtually unchanged at 2.47.
However, “the test will be how economies react to the shock of recently rising yields, and to events in China and the rest of EM over the past few weeks. This might show up in the flash PMI numbers in 3 weeks so we shouldn't get complacent over yesterday's improvements. Nevertheless, markets have been becalmed for now with US yields stabilizing.” the analysts add.
Indeed, 10-year UST yields have range traded on either side of the 2.5% mark for more than a week and yesterday saw a continuation of this pattern. 10-year yields traded up to a session high of 2.55%, before the ISM print, and maybe the softer employment component, saw it come back in to close virtually unchanged at 2.47.