USD: 3 Reasons Why Higher USD and UST yields Could Trigger Significant Risk-Off – Credit Agricole


US bond yields are on the rise and they carry the US Dollar higher with them. What does it means for broader markets?

Here is their view, courtesy of eFXdata:

Credit Agricole Research discusses the implications of the current rally in USD and UST yields.

“The UST move has spilled over into other fixed income (FI) markets and we expect this to continue for several reasons: 1) Oil prices remain very resilient and this is already fuelling inflation expectations especially in economies that saw their currencies depreciating sharply vs USD; 2) Strong USD and higher US rates add to the downside risks for the global stock markets as well as local currency FI markets; 3) Attempts by EM central banks to smooth the selloff of their currencies could further push UST yields higher as they are forced to sell their UST holdings,” CACIB argues.

“The above could suggest that a continuation of the moves in USD and UST yields could give rise to significant further tightening in the global financial conditions.

If left unchecked, the tightening may trigger to sharp deterioration in risk aversion fuelling further gains especially against risk-correlated and commodity currencies,” CACIB adds.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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