Markets are still looking nervous on the week
This goes in tandem to what we saw earlier when German bund yields also hit fresh two-and-a-half year lows. It's been a rocky week for markets and European equities are more or less flat on the day with softer tones being observed since the open.
What's particularly worrying about the move in bonds recently is how synchronised the effect is globally and the fact that front-end yields are also being dragged lower as fears of a yield curve inversion continue to rise.
It's one thing if bond yields globally are falling because of central banks moving to a more dovish stance but it's a whole other thing if they are falling because markets are beginning to draw a line on an economic downturn/recession risk pricing.
I reckon we're still in the infancy phase of the latter and that there is still quite some time before markets adopt a full-on panic mode in the coming quarters. However, the thing to consider is that fear spreads like wildfire so if things escalate in the next few months, it can get real ugly real fast.
But let's put a pin on that for the time being. For today, currencies have barely reacted despite the move in the bond market. That said, we could see more of a follow through move later in US trading so just be mindful of that.
