Start your day with the NAB Morning Call for the latest overnight key economic and market information straight from our team of expert market economists and strategists. This includes perspective on overnight news and market price action and the forces shaping movements in Australian and global markets in the days ahead.
Powell gives no answers, bond yields climb again
Friday 5th March 2021
Bond yields are on the rise, in the US and in Australia – for very similiar reasons. Jerome Powell failed to reassure markets that the Fed had a plan to cope with rising yields. As NAB’s David de Garis explains, the Fed governor was saying the Fed had the tools to use if conditionals materially changed, just as conditions were materially changing! In Australia markets were clearly hoping for more bond buying from the RBA, so when they went returned to their previous buying level, markets were disappointed and bond yields rose again. All of this, of course, driven by inflation fears, for which a spike in oil prices hasn’t helped help. The timing couldn’t have been worse from OPEC+, who failed to agree on easing production cuts. Tonight we get non-farm payrolls numbers in the US and China’s National People’s Congress is on over the weekend. There’s a bit going on.
Bond yields are at it again
Thursday 4th March 2021
Bond yield have been rising sharply overnight. This time it’s being driven not just by optimism about the speed of the global recovery, but also by the likelihood that the UK government will be issuing around £50b higher than the market expected. Chancellor Rishi Sunak has extended the furlough program through to September, along with other assistance measures. This latest jump in yields couldn’t be timelier with Jerome Powell speaking later today, no doubt reiterating the point that the Fed sees no reason to be concerned about inflation. US jobless claims will also be of interest later on – they were down last week, but the ADP employment numbers told a different story last night, with fewer jobs around.
Australia’s growth, China’s warning
Wednesday 3rd March 2021
All eyes will be on Australia’s GDP read this morning, which NAB’s Ray Attrill says is expected to be close to 3% growth QoQ, driven by consumer spending. The warnings yesterday from China’s banking regulator, Mr Guo Shuqing, that the US and Europe face bubbles from excessive leverage haven’t had any lasting impact. The RBA continued to provide guidance that rate rises weren’t likely until 2024 and made it clear that the $4 billion purchases announced on Monday were simply a bring forward, so we can assume they will be compensated by lesser purchases to keep the schedule on-track. Tonight the US ADP employment numbers will be a focal point ahead of non-farm payrolls at the end of the week.
RBA buys up ahead of today’s meeting
Tuesday 2nd March 2021
The RBA might have left itself with very little to say today, having upped their bond buying in response to the sharp rise in yields last week. With bond yields still significantly higher than they were at the beginning of the year Phil Dobbie asks NAB’s Tapas Strickland what else the RBA can do as the Aussie economy finds itself in a better position than most developed nations. The return to normal overnight, with equities back on the rise, has been partially fuelled by stronger than anticipated ISM manufacturing numbers for the US. In fact, most data lately has been on the upside. The Euro is one of the weaker currencies today, perhaps because of an expectation that the ECB too will increase their bond-buying.
Bond yields switch direction as volatility continues
Monday 1st March 2021
Friday saw a reversal in the bond sell-offs earlier in the week, seeing 10 year yields in the US falling back top 1.4%. Phil Dobbie asks NAB’s Rodrigo Catril whether the RBA can ignore this volatility this morning, particularly as they were arguably slow to respond last week, eventually buying up $7 billion of bonds. What impact will Biden’s $1.9 trillion stimulus package have, even if it does get whittled down by $400 million or so this week? And there’s rising concerns about inflation, particularly in Europe. If we are to keep volatility under control we really need to see data which shows a gradual economic improvement, without upside surprises.
A big bond sell-off.
Friday 26th February 2021
Despite the increasing dovishness of central bankers the markets have been selling government bonds like they are going out of fashion. That’s resulting in huge increases in bond yields in around the world, but particularly in the US and Australia. It’s the pace of the move in yields that’s grabbing attention, says NAB’s Gavin Friend in London. Some are also expecting inflation sooner rather than later, evidenced by a rise in yields on shorter term US treasury notes. Spending data tonight could add fuel to this burst of optimism if it suggests there’s more pent-up demand in the US economy.