BOND YIELDS scary now? Rising way bk frm Aug 2020 (& GOLD down)
What this chart shows... The treasury bond yield [RED-GREEN bars] and the price of gold have a strong relationship in the long and medium terms (in inverse directions, hence the use of GLL UltraShort Gold ETF as a comparative measure - PURPLE line). Yields had been falling strongly, and gold price rising swiftly throughout 2019 and into 2020. After the initial Wuhan Virus shock, yields fell even lower and the price of gold rocketed to historical highs - their movements turned around together in early August 2020 (US10Y yield starting to pick up from Mon Aug 3, and gold starting falls from Fri Aug 7), and have been relentlessly moving like that from that date. [KEY: US10Y Yield, RED-GREEN bars / USDJPY, ORANGE / USDEUR, BLUE / USDAUD, YELLOW / GLL UltraShort Gold ETF, PURPLE / IXIC, BLACK]
The US Dollar, which had been generally strengthening for over two years pre-Wuhan, flipped post-Wuhan; and has been weakening over most of the post-Wuhan period to date (despite weaker gold prices and strengthening US yields from early Aug as we have mentioned). Right on cue, within the first week of 2021 (particularly Jan 7), the USD belatedly began to move in the direction of continued higher yields (with an ever weaker gold price) - this was especially notable in the USDJPY yen [ORANGE line] and the USDEUR euro [BLUE line].
Despite a steep surge in bond yields and the USD for four trading sessions from Jan 7 (and accompanying erosion of the gold price), equity markets were not overly disturbed. But it is a further sustained spurt in bond yields from Feb 16, that has market commentators pointing the finger for the shock to the NASDAQ (IXIC - BLACK line). (Out of step, the USD actually weakened when considered against the USDEUR [BLUE line] and the USDAUD [YELLOW line] from Feb 5 to Feb 25; but they seem to be following the storyline after that.)
The US Dollar, which had been generally strengthening for over two years pre-Wuhan, flipped post-Wuhan; and has been weakening over most of the post-Wuhan period to date (despite weaker gold prices and strengthening US yields from early Aug as we have mentioned). Right on cue, within the first week of 2021 (particularly Jan 7), the USD belatedly began to move in the direction of continued higher yields (with an ever weaker gold price) - this was especially notable in the USDJPY yen [ORANGE line] and the USDEUR euro [BLUE line].
Despite a steep surge in bond yields and the USD for four trading sessions from Jan 7 (and accompanying erosion of the gold price), equity markets were not overly disturbed. But it is a further sustained spurt in bond yields from Feb 16, that has market commentators pointing the finger for the shock to the NASDAQ (IXIC - BLACK line). (Out of step, the USD actually weakened when considered against the USDEUR [BLUE line] and the USDAUD [YELLOW line] from Feb 5 to Feb 25; but they seem to be following the storyline after that.)
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