US Treasury 10-year yields closes in on 3.25%
It's a quiet start to the session but the focus of markets remains that of rising yields. And that doesn't just apply to Treasuries although it is the larger theme at play across asset classes. 10-year yields are continuing to climb higher on the day and that is making for added nerves across the equities space still.
E-minis are down by 0.2% currently and a further rise in yields will only serve to unsettle investors even more than it already has. In turn, expect this to keep the dollar underpinned - especially against emerging market currencies. And with equities suffering, a more risk off tone should also continue to support the greenback in that regard.
But as mentioned, Treasury yields aren't the only ones to look at right now. Italian yields are of particular note for euro and risk sentiment. Yesterday's rise helped to cause nervousness in markets and resulted in a more risk off tone which helped to give further rise in the yen.
The start of trading today sees less hints of panic just yet but yields continue to stay at their highest levels since early 2014. That will continue to be a problem for Italy and the euro as long as it stays this way.
The other chart to keep an eye on will be 10-year JGB yields:
Currently, they're up to 0.16% and it once again prompts the question of whether or not there will be intervention to come by the BOJ. The current unspoken rule by the central bank is that they will allow yields to climb to at least 0.20% but they have been known to not be in favour of rapid moves in the bond market.
The reaction in markets to any BOJ intervention to buy "unlimited" amounts to defend rising yields has been a weaker yen. But in recent times, that playbook has been less effective or at least the reaction in the currency has been much tamer. Still, you can't rule that out completely so it's best to be prepared.
