There's no clear catalyst for the roughly 10 bps drop in yields from the highs yesterday. Perhaps month-end rebalancing flows are at play here? That's definitely a consideration alongside the slew of US data for the week, which kicked off yesterday via the JOLTS job openings and consumer confidence data.
Coming up later, we'll have the ADP employment change and Q3 advance GDP data to get through. And then tomorrow, there's the PCE price index and weekly jobless claims. All that before the non-farm payrolls report on Friday.
Going back to yields, the 4.30% mark is a key threshold highlighted by Goldman Sachs here. So, perhaps that added some intrigue to the level in trading this week. But for now, yields are keeping above the 200-day moving average (blue line) still, seen at 4.183%. So, that's one other key line in the sand to be mindful of.
I want to say that the fall in yields today have some part to do with month-end flows but we'll only get a better sense of that come next week. And of course, depending on how the US data plays out in the days ahead.
But as yields are lower on the day, it is putting a stop to the recent dollar gains. USD/JPY especially is down 0.3% to 152.90 currently, with the antipodeans also sitting a little higher against the greenback now.
The pound is the main laggard on the day though but it owes to some nervous feels ahead of the UK budget announcement later. If the budget manages to avoid being fiscally irresponsible, that might trigger a relief rally for the quid. So, that's something to look out for.
