Global market wrap - ANZ

Analysts at ANZ noted that attention was again focused on fixed income markets, which remain vulnerable. 

Key Quotes:

"Unconfirmed reports that officials reviewing China’s FX reserve holdings have recommended slowing or halting purchases of US Treasuries pushed the 10-year rate to 2.58% (+3bps). 

European yields failed to follow as it was mulled whether or not China would therefore buy more European debt. 

The yen also remained firm as expectations about a future policy shift regarding JGB purchases continued. The BoJ is expected to detail its bond buying plans for 1-10 year maturities during today’s Asian trading session. The USD had a defensive tone given the speculation around China and a possible shift in JGB buying policy.

In an environment of rising US bond issuance as the US Treasury replenishes its cash reserves and Washington cuts taxes (widening the budget deficit), any headlines that fan concern about overseas UST buyers is either knee-jerk USD negative and/or requires higher interest rates. However, without China and BoJ policy confirmation, short term FX moves are vulnerable to snapping back. 

Unsurprisingly in the market crossfire, equity markets were generally weaker and funding currencies were supported. The S&P 500 was off 0.2%, the DAX fell 0.8%, CAC 40 fell 0.4% but the FTSE added 0.2%. Oil continued to push higher with WTI up 0.5% at $63.3/bbl."