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  • Spot silver has been under pressure over the last few hours, with XAG/USD now trading in the low $26.00s.
  • Looking ahead, ISM Services PMI will be worth watching (released at 15:00GMT).

It’s not been a good day for spot silver (XAG/USD) markets, with prices having dropped back to the low $26.00s from Asia Pacific highs around the $26.80 mark. Selling really got going prior to the release of a weaker than expected ADP National Employment Change reading, with markets now on notice for the release of the February ISM Services PMI survey, which is set for release at 15:00GMT. At present, spot silver traders with losses of just over 60 cents on the day or about 2.3%.

Driving the day

US bond yields are picking up again and this seems to have triggered some nerves; since the start of European trade, US 10-year yields are up 7bps and currently trading around the 1.475% mark and this is having an impact on other markets, with the USD picking up (though DXY is struggling with the 91.00 level), US equities opening in the red following a pre-market sell off (the S&P 500 is 0.3% lower and the Nasdaq 100 is 0.6% lower) and commodities (excluding crude oil) broadly lower.

Looking more closely at bond market dynamics, real yields are also seeing a pick-up; the 10-year TIPS yield is up more than 5bps in the -0.75% region on the day, though in fairness, this does only bring yields back to roughly where they started the week. The fact that nominal 10-year yields are now roughly 8bps higher on the week means that inflation expectations have increased sharply. This has not come to the rescue of precious metals markets, however, which remain tentative not just ahead of Wednesday’s ISM Service PMI release, but also ahead of Thursday’s speech from Fed Chair Jerome Powell and Friday’s official Labour Market Report for February.

ADP Recap

ADP estimate that the US economy gained 117K jobs in February, lower than expectations for their estimate to show a job gain of 177K jobs. Capital Economics note that this data was a disappointment given that “the drop-off in coronavirus case numbers and the resulting lifting of containment measures should be giving the economy a bigger shot in the arm”. The economic consultancy continues that “the disappointing ADP figure presents a clear downside risk to our otherwise above-consensus estimate that non-farm payrolls increased by 500,000 last month”, but they caveat that “given the ADP’s patchy correlation with the official employment data and the strength of the high-frequency data, we are happy to stick with that estimate”.