top of page
  • Writer's pictureEdward Ballsdon

Market Observations - Simple correction or more?

Updated: Jan 22


This note examines recent extreme bond moves, trying to assess whether it is something new or just a correction offering an opportunity to enter at more favourable levels. In summary:

The Gilt 5yr 24bp yield increase was an extremely rare event.

However, >15bp (+/-) changes have become a more frequent occurrence.

Globally, December inflation data did not suggest a change to the disinflationary trends in place.

Economic surprise indices across many countries are unusually all close to 0

The breakdown in fixed income market structure witnessed in Oct23 has not repeated itself in the current yield correction, but there is a risk it does if yields increase further or range trade

In such a scenario, the correlations between fixed income/equity/credit/USD seen in Nov-Dec23 would reverse (as they have this week)

Commodities continue to trade weak, despite the growing issues in the Middle East

This suggests that there has been only a Central Bank market correction. The risk, though, is that if Central Bankers continue to push back and keep rates on hold too long, thereby reducing the demand for bonds, that fixed income internals deteriorate and cause a revaluation of risk assets.

62 views0 comments

Recent Posts

See All

Rear view driving is dangerous.

Research Content Following the NFP, which delivered another outsized move in bond yields, this note examines some issues that are impacting markets and others in the background that are likely to have

BoJ still in a Straitjacket

RESEARCH CONTENT This report discusses the market speculation about when the BoJ would tighten policy and take rates positive. It notes that there has not been much volatility in JGBs or $Yen – they h

Bank of Canada & Inflation

RESEARCH CONTENT Yesterday the Bank of Canada kept rates unchanged and noted that "the economy had stalled since the middle of 2023, consumers have pulled back their spending, business investment had

bottom of page