As investors awaited U.S. jobs data that could strengthen the case for maintaining high interest rates for some time, a lull in bond selling continued on Friday, although it might not last the entire day.
With Brent crude futures at $84.50 a barrel, roughly $13 or 13.5% less than last week’s 11-month high, the oil market’s switch from rising to falling has also brought some relief.
The MSCI index of Asia-Pacific stocks not listed in Japan (.MIAPJ0000PUS) increased by 0.9%. While currency markets and Tokyo’s Nikkei (.N225) were both flat, the bond market collapse has the dollar on track to post a record 12-week winning streak.
Through the Asia session, ten-year U.S. Treasury rates remained thankfully stable at 4.72%, but they had increased 55 basis points during a five-week selloff that has weighed on bond markets and enthusiasm for risk-taking globally.
Since tighter financial restrictions will weigh on demand and raise the possibility that policy rates are peaking and not pausing, the recent rapid sell-off paradoxically has the power to plant the seeds of its own reversal, according to analysts at Rabobank.
However, prior to the release of U.S. non-farm payrolls data at 12:30 GMT, no one was making large wagers.
Although forecasts range as high as 256,000, economists surveyed by Reuters’ expect it to indicate that 170,000 new U.S. jobs were created in the previous month.
The market won’t want to see a strong number, regardless of where individuals are sitting, according to Jason Wong, strategist at BNZ in Wellington.
Another wave of bond sales would probably help the dollar extend its already-record-long weekly winning streak against the euro. The 12-week winning streak for the dollar index matches one from July to October 2014.
The euro is currently trapped near an 11-month bottom at $1.0542 and sterling is not far from a seven-month low. On Friday, the dollar index remained constant at 106.4.
According to Capital.com analyst Kyle Rodda, “a push through 107 would provide technical evidence of trend continuation.”
Surprisingly, only the struggling yen has put up much of a fight since a sharp increase in the value of the Japanese yen on Tuesday afternoon in London sparked rumours that authorities had intervened.
No irregularities of the kind that might have accompanied intervention were visible in Japanese money-market data. However, the action was eye-catching enough to alert traders.
The yen was recently stable against the dollar at 148.5. In addition, after nine days of losses brought on by rising global bond yields, gold was stable at $1,822 per ounce.
According to SocGen strategist Kit Juckes, “This could only be a brief pause while we wait for data on the labour market, U.S. Treasury supply, and CPI data next week.”
“Pressure will resurface earlier this year than it did last year if the labour market numbers are good. I continue to believe that the Treasury market will push yields higher until the system fails.