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Week Ahead: Financial Markets Remain Fixated On Bond Market Moves

By MarketPulse (Ed Moya)Market OverviewMar 21, 2021 02:38AM ET
Week Ahead: Financial Markets Remain Fixated On Bond Market Moves
By MarketPulse (Ed Moya)   |  Mar 21, 2021 02:38AM ET
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The focus for this week will stay with the bond market. Financial markets are worried with how high Treasury yields can go. Treasuries have declined for seven straight weeks and that has triggered the primary driver for US dollar strength.

Monday is the start of the Bank of International Settlements’ Innovation Summit, a four-day summit that will have key speeches from ECB’s President Christine Lagarde, BOE Governor Andrew Bailey and Federal Reserve Chair Jerome Powell.

Must-watch TV will happen on Wednesday when Fed Chair Powell and Treasury Secretary Janet Yellen have their first joint appearance before the U.S House Financial Services committee. Powell and Yellen will also speak together before the Senate banking panel on Thursday, which should be mostly reaffirmations of the current ultra-accommodative stance with a united defense over the Fed and Treasury pandemic policies.

The key economic releases of the trading week will be the flash PMI readings across the US and Europe on Wednesday and US personal income and spending data at the end of the week.


It is still all about the bond market. The Fed’s latest decision to end emergency capital relief to banks will make the upcoming Treasury auctions very important. If bank interest is low, the bond market selloff could intensify. Eventually skyrocketing Treasury yields, perhaps the 10-year Treasury yield closer to 2.25%, will trigger Fed action.

Now that the Fed has ultra-accommodation on cruise control, investors will need to see strong upside surprises with key data for it to excite markets. A wrath of economic data will be released, with many traders focusing on the flash PMI readings, final fourth quarter GDP readings, and personal income and spending data. The PCE inflation readings for February will draw some attention but they are not yet expected to rise significantly.

The biggest short-term risk to the economic outlook remains virus variant risks and this week could start to show cases are rising across more states. A handful of states are seeing virus cases increase as the faster spreading variants become the dominant strain and as some states reopen early.


The listless COVID vaccine rollout in the EU is worrying investors and souring sentiment towards European equities and the euro. The EU has bet heavily on the AstraZeneca (NASDAQ:AZN) vaccine, and reports of serious side effects from the vaccine led to the suspension of AstraZeneca shots by a number of EU members, including heavyweights France, Germany and Italy.

The European Medical Agency declared AstraZeneca safe to use on Thursday, and countries that had suspended its use will resume the jabs today or next week. Still, all the negative publicity has caused hesitancy among the non-vaccinated populace, and Europe’s vaccine numbers will have to improve in order to raise sentiment towards European equities and the euro.

On Wednesday, Germany (Services, Manufacturing), the Eurozone (Services, Manufacturing) and France (Services, Manufacturing) release their services and manufacturing PMIs for March.

The Manufacturing PMIs continue to show strong expansion, but the services sector remains in contraction territory, with readings below the neutral 50-level. ECB President Christine Lagarde will speak at an event hosted by the Bank for International Settlements on Wednesday, and any comments from Lagarde about higher bond yields could move the market.

As well, the German cabinet is due to sign off on a 2022 budget plan. On Thursday, Finance Minister Olaf Scholz said that Germany needs to increase debt spending to help tackle the impact of the coronavirus. Sholz said that he is considering a “timely, targeted and temporary” stimulus plan to revive economic growth once the coronavirus eases.


The Bank of England held steady with monetary policy last week, maintaining interest rates at 0.10% and QE at 895 billion pounds. Investors will be interested in this week’s ‘BoEspeak’, which may shed light on the central bank’s plans, in the light of rising bond yields.

BoE Governor Andrew Bailey will participate in panel discussions on Tuesday and Thursday. The BoE will release the FPC minutes from the bank’s last policy meeting and the FPC quarterly statement on Friday. On the data front, the UK releases inflation numbers and PMIs for services and manufacturing.


The SNB sets interest rates on a quarterly basis. Interest rates have been pegged at -0.75%, the lowest of any DM central bank. The bank has done its best to make the Swiss franc less attractive to investors, in order to protect exports. However, the markets have largely ignored the negative interest rate, as the Swissie remains an attractive safe-haven asset.

Emerging Markets

Czech Republic: The Czech National Bank is expected to maintain interest rates at 0.25%. The bank has slashed rates since March 2020, when rates were at 1.75%.

South Africa The South African Reserve Bank’s interest rate stands at 3.5%, where it has been pegged since July 2020. No change is expected at next week’s meeting.

Hungary The central bank (MNB) is projected to maintain interest rates at a record low of 0.60%, where it has been pegged since July 2020.


The rise in US yields, the ongoing crackdown on China big-tech, and a rocky start to US talks in Alaska has seen retail hot money liquidating Mainland and Hong Kong stocks, despite a number of IPO’s about to hit the Hong Kong market. The Shanghai Composite and Shanghai Shenzhen CSI 300 technical pictures have now moved into bearish retracement territory leaving both markets vulnerable to deeper selloffs in the coming week.

No sign was seen of China’s “national team” intervening on Friday to reverse the sharp falls in both indexes, and if they remain sidelined next week, the selloff could turn into a rout.

China releases its latest Loan Prime Rates decisions on Monday in a quiet data week. No change is expected but the PBOC continues keeping liquidity tight via the repo market. Again, another negative factor for China stocks.

The yuan has remained stable around 6.5000, limiting the contagion of higher US rates and the dollar in China and Asian EM as a whole. If the fixings are moved higher this week aggressively, that could all change. The week ahead will be dominated by US treasury yields and their impact on retail equity investors across Asia..


No significant data.

The USD/INR has proven invulnerable to US dollar strength although the Sensex ends the week 3.0% lower. With India forex reserves climbing to the 4th highest in the world, markets appear reluctant to sell the INR and test the RBI. But a deeper US bond selloff this week leaves both the INR and Indian equity markets vulnerable to an EM taper tantrum.

India remains one of the most vulnerable countries to rising US yields and commodity prices due to its weak current account and foreign currency denominated debt.

Australia And New Zealand

No significant data.

A simply stellar week of Australian data and a dovish RBA minutes could not save the Australian dollar. Markets instead are laser focused on the continuing rise in Australian CGB yields and fears the RBA may have to tighten sooner. The rise in US long yields is having an outsized effect on that equation.

Australian equities are treading water with steeper yield curves and firm commodity prices supporting banks and resources, but weighing on other sectors The technical charts show the ASX 200 in danger of joining the All Ordinaries in downside correction territory. Both are vulnerable to a weaker Wall Street this week.

Similarly, the Australian and New Zealand dollars gave up all their gains last week and both have failed to recapture their downside breakout levels. More US dollar strength and/or higher yields this week threaten both with 200 point moves possible.


Japan data showed signs of a nascent recovery although inflation remains as elusive as ever. Markets focused on the Bank of Japan meeting which has widened the corridor in which JGB’s can trade, sending yields higher. The BOJ also stated they would only buy TOPIX-related ETFs going forward, not Nikkei 225-linked ones. Both developments are negatives for the Nikkei 225 into this week with only second-tier data releases. Like other North Asian indexes, the Nikkei 225 is in danger of breaking into downside correction territory in the coming week.

The Japanese yen has proven immune to both US developments and the BOJ tolerating higher rates, being unchanged around 109.00 the past week. Higher JGB yields could prompt repatriation flows this week pushing USD/JPY lower. However if the pace of US yield rises remains the same, the balance shifts towards USD/JPY rising above 110.00.



Crude prices took a big hit after the demand outlook crumbled following Europe’s struggle with COVID-19. Adding to the selling pressure was a surge in Treasury yields that kept the dollar strong.

The short-term crude demand outlook could deteriorate even further if Europe shows significant vaccine hesitancy. The risks are growing that Europe won’t have a normal summer and that could drag down jet fuel demand forecasts.

The demand outlook remains strong for the second half of the year, but oil prices could still see some further short-term pain if the virus spread across Europe does not improve.


Gold is well off the post-Fed highs, but still looking to finish the week on a positive note despite a strong move higher for Treasury yields. Gold ETF (NYSE:GLD) outflows continued for a sixth consecutive week, but the pace is slowing.

The next few months will be very tricky in identifying what will be the primary catalysts for bullion investors. Wall Street will remain fixated on the bond market selloff and recent disdain for technology stocks.

Gold is starting to attract some investors because eventually rising Treasury yields will surely be countered by Fed action. The S&P 500 index won’t be able to climb higher if mega-cap tech stocks don’t get their groove back and any hesitancy in that trade should trigger some safe-haven flows into gold.


Bitcoin has been somewhat steady despite a very volatile time on Wall Street. Institutional interest excitement is somewhat easing and prices appear poised to consolidate. It seems that only investments over $100 million will only spark some excitement now that Bitcoin prices remain elevated.

Regulatory fears are starting to return, but nothing major appears to be on the immediate horizon, but that could quickly change.

Economic Events and Data

Sunday, Mar. 21

  • Saudi Aramco (SE:2222) reports full-year 2020 results

Monday, March 22

  • Bank for International Settlements holds its Innovation Summit through Thursday. ECB President Lagarde, BOE Gov Bailey and Fed Chair Powell will speak
  • Richmond Fed President Barkin speaks to the Maryland Bankers Association.
  • San Francisco Fed President Daly hosts a virtual discussion on the future of education.
  • German Chancellor Merkel reviews current restrictive measures with regional leaders.
  • ECB Governing Council member Klaas Knot speaks at Dutch central bank’s annual press conference.
  • Swiss National Bank publishes its annual report.

Economic Data:

  • China loan prime rates
  • New Zealand consumer confidence
  • Japan convenience store sales, leading index, coincident index

Tuesday, March 23

  • St. Louis Fed President Bullard speaks to the London School of Economics.
  • New York Fed President Williams (NYSE:WMB) discusses the New York economy.
  • Eurex Derivatives Forum Frankfurt 2021 is held virtually. Through March 24.
  • Bank of Canada Deputy Governor Gravelle gives a speech to the CFA Society Toronto.
  • ECB Governing Council member Villeroy speaks at presentation of the Bank of France’s annual report.
  • Germany’s Merkel hosts a summit for CEOs of carmakers.
  • Bundesbank President Weidmann, BIS General Manager Carstens and the Fed’s Powell speak at BIS conference.
  • BOE Governor Bailey speaks as a pre-recorded panelist on “unlocking investment for net zero”
  • Chief Economist Haldane speaks on a panel on an Institute and Faculty of Actuaries webinar
  • GameStop (NYSE:GME) reports earnings after the close

Economic Data:

  • US new home sales
  • Italy industrial orders
  • Australia ANZ Roy Morgan consumer confidence
  • New Zealand trade, credit card spending
  • Singapore CPI
  • Japan department store sales, machine tool orders
  • U.K. jobless claims, unemployment
  • Hungary central bank interest rate decision: Expected to keep bank rate unchanged at 0.60%

Wednesday, March 24

  • Fed Chair Powell and Treasury Secretary Yellen will speak before the Senate Banking Committee on the quarterly CARES Act report to Congress.
  • New York Fed President Williams takes part in a virtual discussion hosted by Syracuse University and Onondaga Community College.
  • San Francisco Fed President Daly will discuss her research on equitable growth.
  • Chicago Fed President Evans participates in a virtual Q&A hosted by the Japan America Society of Chicago.
  • German cabinet is due to sign off on a 2022 budget plan
  • EIA Crude Oil Inventory Report

Economic Data:

  • Eurozone Markit services PMI, consumer confidence
  • Major European PMI data: France, Eurozone, Germany, UK
  • Mexico unemployment
  • UK CPI
  • South Africa CPI
  • South Korea PPI
  • Czech Rate decision: Expected to keep Repurchase Rate unchanged at 0.25%
  • Thailand rate decision: No change expected with Benchmark Interest Rate, trade data
  • New Zealand trade
  • Australia preliminary merchandise trade, Markit Australia PMI
  • Japan Bank PMI, PPI

Thursday, March 25

  • US congressional hearing with CEOs from Facebook (NASDAQ:FB), Google (NASDAQ:GOOGL) and Twitter.
  • EU Leaders Summit with a focus on COVID, industrial policy, and the eastern Mediterranean to relations with Russia.
  • ECB’s Lagarde, BOE’s Bailey, ECB Governing Council members Weidmann and Villeroy, Riksbank Governor Ingves and NY Fed President Williams speak on a panel at the BIS Innovation Summit about central bank innovation.
  • New York Fed’s Williams speaks to the Urban Core of Syracuse.
  • Chicago Fed President Charles Evans addresses the Women in Housing and Finance meeting.
  • San Francisco Fed President Daly discusses monetary policy
  • Economic Club of New York hosts a webcast with Fed President of Atlanta Raphael Bostic.
  • Finance ministers and central bank governors from the Association of Southeast Asian Nations member states are scheduled to meet over the next five days.
  • Fed Vice Chair Clarida speaks at the IIF Washington Policy Summit
  • ECB publishes its economic bulletin.

Economic Data:

  • US initial jobless claims, Q4 Final GDP
  • Japan Tokyo CPI
  • South Africa SARB Rate decision: Expected to keep Interest Rates unchanged at 3.50%
  • SNB Interest Rate Decision: No change expected with interest rates.
  • Mexico central bank (Banxico) Rate Decision: Expected to keep key rate steady at 4.00%
  • Euro-area flash PMIs
  • U.K. flash PMIs, inflation rate
  • France manufacturing confidence

Friday, March 26

Economic Data:

  • US Personal Income and Spending, wholesale inventories, University of Michigan consumer sentiment
  • Mexico Trade data
  • Germany Mar IFO business climate: 93.4 estimate v 92.4 prior
  • Singapore industrial production
  • Spain GDP
  • South Korea consumer confidence
  • Italy consumer confidence, manufacturing confidence
  • Japan Tokyo CPI
  • Thailand capacity utilization, manufacturing production index
  • Taiwan monitoring indicator
  • China BoP
  • Norway unemployment

Sovereign rating updates:

  • Belgium (Fitch)
  • Germany (S&P)
  • Saudi Arabia (S&P)
  • Hungary (Moody’s)
  • Sweden (Moody’s)
  • European Union (DBRS)
  • Sweden (DBRS)

Original Post

Week Ahead: Financial Markets Remain Fixated On Bond Market Moves

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Week Ahead: Financial Markets Remain Fixated On Bond Market Moves

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