Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Government Bond Trading Quiet As Investors Wait On Central Banks

By Investing.com (Darrell Delamaide/Investing.com)BondsJun 08, 2021 04:33AM ET
www.investing.com/analysis/government-bond-trading-quiet-as-investors-wait-on-central-banks-200584772
Government Bond Trading Quiet As Investors Wait On Central Banks
By Investing.com (Darrell Delamaide/Investing.com)   |  Jun 08, 2021 04:33AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Government bonds seem to have entered the summer doldrums as yields in the U.S., Europe, and Japan stay in a narrow range. A meeting this week of the European Central Bank governing council and next week of the Federal Open Market Committee may rattle that lethargy, but policymakers will be at pains to avoid any disruption.

The ECB will have to walk a tightrope to seem dovish enough to maintain monetary accommodation, but hawkish enough to be alert to the dangers of inflation. The council will be reviewing the pace of its bond purchases under the emergency pandemic program, but it’s anybody’s guess whether they will change anything.

Germany has been experiencing uncharacteristic political turmoil. The environmental Greens party surged ahead in polls after naming the 40-year-old Annalena Baerbock as chancellor candidate, but enthusiasm has waned after missteps by her and the party.

Sunday’s gains in a state election by Chancellor Angela Merkel’s Christian Democrats are seen shifting the momentum in the race in favor of their chancellor candidate, Armin Laschet, who looks bland and old-fashioned next to Baerbock, but heads the country’s most populous state and its biggest political party.

The yield on Germany’s 10-year bond, which had crested above minus 1% in May, is now within a whisker of minus 2%, as the country settles back into more traditional politics.

The Federal Reserve is widely perceived to be off the hook for talking about tapering its bond purchases after last week’s job report came in below expectations and eased investor concerns about a runaway economy forcing the Fed’s hand on monetary policy.

The yield on the benchmark 10-year Treasury note was virtually flat on Monday, at about 1.57%, after falling several basis points on the job news Friday, as investors felt the Fed could relax and not hurry to make any changes in monetary policy.

Even when Treasury secretary Janet Yellen, the former Fed chair, said over the weekend that higher interest rates spurred by a rise in inflation would be a “plus” for the economy, investors took it in stride. After all, she was hawking President Joseph Biden’s ambitious $4 trillion spending plans—which may turn out to be a pipe dream as opposition builds even among Democrats.

Senator Joe Manchin, the maverick West Virginia Democrat, effectively shut down any quick actions when he said over the weekend that he will not support a much-touted bill mandating expanded voter access because passing it on a strictly partisan basis would divide the country even further.

With 50 Republican senators unified in opposition, Democrats would need every one of their 50 votes to have Vice President Kamala Harris break the tie, so Manchin’s defection is a deal-breaker.

Manchin also reiterated his opposition to diluting the Senate filibuster, which means 10 Republicans would have to join with all the Democrats to advance legislation. If the filibuster remains in place, Democrats would not be able to enact Biden’s full agenda.

Senate Parliamentarian, Elizabeth MacDonough, finally found the nerve to stand up to Senate Majority Leader, Chuck Schumer, and rule out using the budget reconciliation technique an indefinite number of times to ram through legislation in “the ordinarily deliberative Senate.” She said budget reconciliation—which is exempt from filibuster—should be reserved for extraordinary circumstances.

All this may sound arcane, but it is designed to foster compromise and bipartisanship, which, as Yellen might put it, would be a plus for the country.

The consumer price index coming out this week could potentially upset investors, but it would have to be alarmingly higher than the forecast 4.7% gain year-on-year to affect trading.

The Japanese government bond market has come to a standstill. Most bonds are not even traded in the absence of any market-moving data, and tight yield curve control from the Bank of Japan has contained any possibility of a breakout.

Inflation, in contrast to the U.S. and Europe, is declining in Japan as the vaccine rollout has been slow, and COVID-19 infections are surging again.

Government Bond Trading Quiet As Investors Wait On Central Banks
 

Related Articles

Government Bond Trading Quiet As Investors Wait On Central Banks

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email