Stocks & Yields ahead of the Fed

The rebound in the Japanese yen and pullback of US yields emerging after Wednesday's release of the Fed minutes has been attributed to various factors, such as “buying the USD rumour, selling the fact”, less dovish than expected minutes and/or the expectations that rates liftoff could be one-&-done rather than the start of a tightening cycle. This helped explain the corrective decline in the US dolla, bringing us to the persistent strength in equity indices and their reluctance to follow yields lower as seen in the charts below.

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When the usually positive correlation between US 10-year yields and a major US equity index such as the S&P500 is halted during key releases or speeches, questioning the reason to the break or interruption opens new and old ideas. Yields failed to break above their 100-WEEK MA for the 3^rd time since over the past 12 months, while S&P500 attempts to escape higher, chasing the elusive 2100 barrier.

The relationship between equities and bonds will be closely monitored over the next 3 weeks' release of US data on consumers, manufacturing, services, inflation and jobs. Later into the start of the Asia Friday session, a new trade shall be issued in the Premium Insights to capitalise on the above relationship fundamental rationale and technical charts.