Government bond yields have been backing up sharply in recent weeks. Yesterday the key US 10 year yield (the main risk free rate in global financial markets) reached 1.30 per cent yield at its close.
Rising government yields tend to correlate with outperformance by cyclicals, financials and energy stocks/sectors. February, so far, has been consistent with that theme: Emerging markets and the cyclically sensitive Japanese Nikkei 225 have been key outperformers in February. Bond prices, though, are now oversold begging the question: What next?
Key events today include the release of the minutes of the Federal Reserve’s last meeting later this evening at 7pm London time.