Treasury yields

• Ten-year Treasury yields have fallen to a six-week low.
• The bond market remains an interesting place to watch, and after the unrelenting selloff (due to deleveraging pressures) in March and April, we are seeing steady bids in the last three weeks. It may be overdue after a year of one-way traffic, with 10-year Treasury yields more than doubling from 1.60 percent to a high of 3.20 percent just three weeks ago.
• Given that we have somewhat fully priced in Fed hawkishness (at least for the time being) in terms of what policymakers are signalling, it is a potentially significant trigger for bond selling to slow.
• The market now expects a lower and earlier terminal rate than a month ago, which makes sense.
• In this regard, the market may be sensing that the Fed’s window for tightening is closing. And one could argue that this is undoubtedly due to stagflation and rising recession risks.
• The BOE is a clear example of this, and it is certain that the Fed does not want to become one day. For the time being, it is keeping the bond rout in check, as yields are set to fall for the third week in a row. This, in turn, helps to relieve some of the pressure on the Japanese yen.
• USD/JPY is now down 0.5 percent on the day at 126.60, with the technical picture pointing to a potential push towards 125.00 if a firm drop below 127.00 is sustained and the bond market cooperates.

Russia

The Bank of Russia has reduced its key interest rate from 14 percent to 11 percent.

Russia’s central bank lowers its key rate by 300 basis points to 11%.

Maintains the possibility of key rate reductions at upcoming meetings

External conditions for the Russian economy remain difficult, severely limiting economic activity.

There hasn’t been much movement in the Russian rouble, which has been one of the best performing currencies in the world this year (after being among the worst back in March)

Equities

US futures pare slight advance as equities retreated slightly in a push and pull session

And now we’re going the other way.

Even if US stocks avoid an eighth consecutive weekly drop this week, this still suggests that the overall mood in equities is rather uneasy.

Taking a broad view:

• Eurostoxx plus 0.3%
• Germany’s DAX increased by 0.3%;
• the UK’s FTSE remained unchanged.
• CAC 40 +0.3% in France
• S&P 500 futures are down 0.1 percent.
• Nasdaq futures are down 0.5 percent; Dow futures are unchanged.

Germany

• Germany says it will push for an oil embargo against Russia and may look for alternatives in the coming days.
• Some words from Germany’s Economy Minister, Robert Habeck
• Habeck singles out Hungary ahead of the next EU leaders’ meeting at the end of the month.
• He claims that: All countries, including Hungary, must reduce their reliance on Russian oil.
• If you use that as a starting point for discussion, you should be able to reach an agreement.
• It will be extremely difficult to incorporate other issues into the discussion of an oil embargo. Intensive discussions are currently taking place.
• We have the next EU Council in five days, and I assume that will be the corridor in which an agreement is reached or other instruments are considered.”
• There’s no mention of what the “other instruments” might be, so we’ll have to wait and see. As things stand, Hungary is the primary opponent of Russia’s oil embargo.

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