iPoint (iPoint.cz)
Czech markets  |  March 11, 2013 09:20:26

Share views on the 11th 3: U.S. bond yields rise sharply: Shares catch another sap?

iPoint.czUnexpectedly good data from the labor market in the U.S. later this week to support the ongoing rally in the equity markets. The increase in jobs outside the agricultural sector was 236,000 in February, which was well above expectations. Also, the unemployment rate fell to 7.7%, while the predicted stagnation to 7.9%. We were so seeing quite a few normal phenomenon when stock markets rose, prices fell federal bonds and the U.S. dollar at the same time dramatically strengthened. This link should not hold out too long with how open carry trade pushes the weakening of the U.S. dollar. Dollar index since early February solidified almost 5%, which is due to prolonged global optimism in financial markets and a very special performance coming days is likely to require correction.

This week will be announced Macro slightly weaker than normal, but will certainly be monitored at the center of retail sales in the U.S., on Thursday and Friday EU economic summit on Friday index of consumer sentiment by the University of Michigan. Absence of major macro data that have been in recent weeks promoting growth, this week may affect the performance of weaker equity markets.

U.S. trading

Yields on ten-year U.S. federal bonds in the past week rose sharply, while rising five days in a row and exceeded 2%. Currently thus move up from April last year. U.S. federal bonds, which are seen as a safe asset in times of financial uncertainty experienced in recent weeks with the outflow of investors as the demand for risky assets increases.From its lows of July revenues increased for the ten-year bonds by 68 bps (+49%). This trend but we may not be far from over, as from a historical perspective, yields still at extremely low levels. Expectation of better performance of the U.S. economy and higher inflation due credit growth and rising share prices will remain the weeks and months to push revenues up on bonds. It will probably be done until that moment when the financial markets in turn increases uncertainty. Then secure federal bonds can once again become a desirable asset. DJIA Index ended the week higher by 0.47% at their historic highs, just below 14,400 points.In response to strong data from the labor market led growth were financial stocks, particularly in sub-sectors such as life insurance stocks Lincoln National (LNC), which solidified over 4%, and MetLife (MET) with the performance of almost 5%.

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