Bond yields rose sharply after the latest ISM Manufacturing data

Equity markets pared off their early pre-markets gain to close lower, while Nasdaq managed to eke out a tiny gain of 0.1% during the last 10 minutes of trading. 

💸It was a volatile session, especially as traders returned to their desks after a long weekend while digesting last Friday’s PCE data and Monday’s ISM Manufacturing readings. 

🎲The conclusion is clear: the economy is resilient, and the Federal Reserve has little reason to ease monetary policy given the solid economic activities. The bond market is quick to reflect this narrative. We saw the 10-year Treasury yield rise sharply by over 0.1%, mounting on major equities to deliver a green day. The rise in the yield sharply dented small and medium-caps stocks, with Russell 2000 taking the lead in the fall. 

💰During the start of the year, major corporations took advantage of the lower interest rates to issue new bonds. This comes as investors’ appetite for high-quality bonds was high. Such bonds yielded 5.36%, a drop from 6.44%, meaning a cheaper company borrowing cost. 

📪What’s on the menu today? 📤

1) At 10 pm, we will receive the Factory Orders (MoM) for February. At the same time, the JOLTs Jobs Opening data will be released. We need a slight cooling to ensure that inflation can be tamed. 

2) Between 10.10 pm and 1.30 am, we have a string of FOMC speakers, from Bowman to Williams, Mesters, and Daly, which may become a volatile session. 

It is Tuesday, 2 April, 8.55 am in Singapore and 8.55 pm in New York. With the rising volatility, traders took profit off the table and re-assessed the outlook ahead, paring down the odds of a rate cut in June. This also comes as we will be ushering in a new earnings season. 

We hope all our friends have a splendid day at work and school.