Bond Market Bloodbath Amid Positive News; Dollar and Oil Prices Skyrocket

Positive Macro Surprises

Is good news really good news? The week ended with a series of positive macro surprises, including a slip in payrolls that many found disappointing. The US Macro reached its highest point since April, turning positive this week.

Plummeting Rate-Cut Expectations

Expectations for rate cuts have taken a dive, indicating a hawkish trend. This has resulted in an explosion in Treasury yields with a 2Y increase of +22bps today and 30Y +9bps. This week saw a dramatic increase in 2Y yields, up over 36bps, resulting in a dramatic flattening of the curve.

Pushing 10Y Yield towards 4.00%

The 10Y Yield is pushing back towards 4.00%, and the yield curve (2s10s) has bear-flattened significantly this week, almost returning to an inverted state.

Bond Yields and Stocks

Bond yields caught up to stocks today. The hawkishness in STIRs and higher rates did not deter stocks today as they squeezed up to unchanged. Small Caps had the most significant increase today, although they were the worst performers of the week.

Rising Dollar and Oil Prices

The dollar surged higher today, reaching its highest closing point since mid-August. The dollar was up every day this week, marking its best week since September 2022. Crude oil prices also saw a significant increase this week, marking the best week since October 2022.

Bitcoin, Gold, and Sovereign Risk

Bitcoin was down this week, but found support at $60k. Gold ended the week slightly lower. Despite the 'Goldilocks' scenario, USA sovereign risk refuses to drop, indicating that something is happening under the hood.

Bottom Line

This week's economic events have sparked a series of reactions in the financial markets, from bond yields catching up to stocks, to the dollar and oil prices soaring. However, with the USA sovereign risk refusing to drop despite positive macro surprises, it begs the question: what's really going on beneath the surface? We'd love to hear your thoughts on this. Share this article with your friends and sign up for the Daily Briefing, every day at 6pm.