Treasury yields continue to rise and the stock market is renewing its highs

The global rally of shares continued during the Asian session on Tuesday. The S&P 500 surpassed 3950. Japan's Nikkei 225 increased by almost 2%, fixing above 30,000, and has a leading position of growth in Asia. Bonds price, as a defensive asset, continues to fall amid hopes that the distribution of the Covid-19 vaccine will help to accelerate the global economic recovery.

10-year Treasury bonds yield increased above 1.24% – the highest level in almost a year. Inflationary expectations are growing mainly due to the oil market. In the last five years, the Treasury yield curve is demonstrating the steepest upward slope as traders count on faster economic growth. Investors are becoming more and more confident that the acceleration of vaccination programs, the increase of tax breaks, and the maintenance of conservative central bank policy will pull the global economy out of the crisis in the near future.

Meanwhile, British Prime Minister Boris Johnson is reviewing a plan to phase out social restrictions and trade. It is expected that the dates for the cancellation of quarantine measures will soon be approved. According to him, the government wants these restrictions to be the last ones during the pandemic. Against this background, the British FTSE 100 index accelerated its growth and almost reached the maximum values of January this year. The sterling has renewed its yearly highs and is close to 1.4000.

The Reserve Bank of Australia published the minutes of its last meeting, which indicates the need to extend the QE program, explaining that it will take years to achieve inflation and unemployment targets. In addition, the RBA is attempting to put pressure on the Australian dollar, which is near the April 2018 highs. The soaring prices on the commodity market contribute to the growth of the currency. The monetary regulator is trying to keep the currency from further value appreciation.

Main market quotes:

S&P 500 (F) 3,950.38 +19.38 (+0.49%)

Dow Jones 31,458.40 +27.70 (+0.09%)

DAX 14,100.35 -9.13 (-0.06%)

FTSE 100 6,771.38 +15.27 (+0.23%)

USD Index 90.328 -0.142 (-0.16%)

• – ZEW Economic Sentiment Index in Germany (Feb) at 12:00 (GMT+2);
• – Eurozone GDP (q/q) (q4) at 12:00 (GMT+2).

by JMarkets, 2021.02.16

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.