- US bond yields soar to 6 month highs at 3.33%, close at 3.23%
- US auctions $21 bln 10-year notes at 3.34%, prices rally strongly after auction
- US tax cut bill still drawing fire from Obama’s left
- Silver drops over 5% on higher yields, dollar strength
- Gold falls to $1372 intraday, closes at $1380
- German government spokesman pushes back at “un-European” criticism
- RBNZ holds rates steady; outlook softer near-term; rates to rise more slowly than earlier forecasts
All the markets were dominated by moves int he fixed income arena today as traders tried to determine if the bond market is signaling an impending US fiscal crisis, a strong economic recovery, a loss of confidence in the dollar or all/none of the above.
One thing is for sure, big rate moves are common in December and are not to be toyed with…
To put some perspective on the recent rate rise, at one point today we were 100 bp higher in yield than were were at the height of the QE-inspired bond bubble in October.
EUR/USD found support above 1.3200 in New York today despite the massive interest rate spike, a sign that rates may be rising for the “wrong reasons”. If growth or expected growth were the catalyst, we would have expected a more significant dollar rally.
Once yields topped out and eased 10 bp (from 3.33% to 3.23%), the dollar eased across the board. EUR/USD rose to 1.3280 and USD/JPY fell to 83.90 from 84.30 highs.
The heavy selling of metals early in the day pushed AUD through stops below the 0.9760 level. It rebounded to end at 0.9785.
Look for markets to only get thinner and more erratic as we progress toward the holidays.
Christmas parties begin tomorrow night in earnest and algos will be running the show on Friday, no doubt…