Daily Alert – Wednesday 10th March 2021: US bond yield pauses…equities rise

Mark NugentDaily Alert, March 2021

Daily Alert – Wednesday 10th March 2021: US bond yield pauses…equities rise

The US 10-year bond yield takes a breather yesterday and the USD resumes its downwards path. Is this a turning point for the yield, or merely a pause?

I entered EURUSD short on Monday just before the US bond yield paused. At the pause, the EUR weakness and USD strength reversed, and I was taken out for a loss of 1%.

Also on Monday, the Nasdaq entered correction territory (a drop of at least 10% from the high). I placed a pending long trade, requiring the price to move upwards before triggering me into the trade. I was triggered on Tuesday and so far, the trade is around 2x risk in the money.

Today we are moderately risk-on and all the factors in the risk calculation are pointing in the same direction. This means, at least for the moment, most of the normal correlations are working as expected.

Tomorrow we have the ECB rate and statement. Like in the US, the European bond yield has been soaring and this has potentially become the key problem facing the ECB, taking over from a strong EUR. It is difficult to mount an economic comeback when your bond yield is leaping upwards. The market is expecting to hear something about this tomorrow from Christine Legarde (and the answer is more bond buying).

I’ll be back on Friday.

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