Yields on the 10-year US treasuries continued to ease, getting to a low of 2.65% during the week of Aug 1-5. Technically, the 10-year treasury yield has broken down from a top formation, at around 2.82%. The US bond market is a lot deeper than the investor pool of the STI. As such, technical indicators should work better because they are an indication of crowd sentiment. These yields may rebound during the week of Aug 8-12, but if a clear downtrend develops, equity markets will continue to cheer.
The worrisome trend - which has been evident for several weeks now - is that yields on the 2-year US treasuries remain higher than yields on 10-year treasuries. The 2-year treasury yield is above 3%, and as at Aug 5 stands at 3.052%. Hence longer bond yields are lower than yields on shorter tenors, an indication of recessionary trends.
Policy rates continue to rise. Whether further indications of a recession will stay the hand of the Federal Reserve remains to be seen, but market players appear to be thinking so.
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