Treasury yields recovered as risk sentiments stabilised due to US-China trade tensions easing and investors fear the ECB could announce less stimulus this week. 

Both the US 10-year and 30-year treasury yield hit a one-month high with 10-year climbing 1.706% and 30-year reaching 2.184%. This marks the highest both yields have move since 9 August 2019.  

The reason for the increase in yields was contributed by overall improvement in risk sentiment. The improvement in sentiments could be attributed to a few events

  1. PBOC’s decision to lower its RRR by 50bps
  2. A no-deal Brexit was delayed after Parliament passed a bill which ruled out a no-deal
  3. Easing of US-China trade war 
  4. Fears that the ECB may not announce as much stimulus as expected by the market

The ECB’s rate decision on Thursday could be the deal breaker on whether risk sentiments could continue to improve. Market is pricing in on a very dovish ECB which is expected to cut rates by 10bps and introduce a larger stimulus package.

However, the remarks by some ECB officials in recent days have cast doubt on the likelihood of a fresh round of asset purchases. Look out for our sneak peek tomorrow for a deeper analysis on the ECB’s monetary policy meeting.

USD/JPY could head higher towards 108.50 this week. 

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Fullerton Markets Research Team

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