All eyes remain on bonds

Yields holding steady just above the lows of the day

This is the tail that’s wagging the dog at the moment.

The dip an hour ago in 10-year yields led to immediate reverberations in FX, with commodity currencies (esp NZD) falling quickly.

You can sense the apprehension throughout markets. Equities have had a nice two-day bounce but it’s been a big move and needs a breather. Whether that’s sideways or a retracement will depend on what happens in yields next.

As you can see from that chart, the the 1.260% level is shaping up toe be support. It also looks like a bit of a head-and-shoulders top that would target 1.22%.

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