A lull in bond sales has expanded into Friday but may not last the day as investors await US job data, which might strengthen the case for maintaining higher interest rates for some time.
Oil’s shift from rising to falling has also brought relief, with Brent crude futures at $84.50 per barrel, some $13 or 13.5% lower than the previous week’s 11-month high.
MSCI’s broadest index of Asia-Pacific stocks outside of Japan increased 0.9%. The Nikkei in Tokyo was flat, as were currency markets, albeit the bond collapse has the dollar on track for an all-time high 12th consecutive week of gains.
Ten-year US Treasury rates were constant at 4.72% through the Asian session but have risen 55 basis points in a five-week selloff that has weighed on bond markets and enthusiasm for risk-taking around the world.
“The recent sharp sell-off has the paradoxical power to sow the seeds of its own reversal,” noted Rabobank analysts, because tighter financial conditions will weigh on demand and increase the likelihood that policy rates will peak rather than pause.
Nobody was betting big before the release of non-farm payroll statistics from the United States at 1230 GMT.
Economists surveyed by Reuters expect it to show 170,000 new jobs in the United States (USNFAR=ECI) last month, though forecasts range as high as 256,000.
“It’s hard to disentangle where people are sitting, but the market won’t want to see a strong number for sure,” said Jason Wong, strategist at BNZ in Wellington.
INTERLUDE
Another round of bond selling would certainly extend the dollar’s weekly winning streak versus the euro, which is already the longest in history. The dollar index has risen for the 12th week in a row, matching a trend that lasted from July to October of 2014.
The euro is trapped near an 11-month bottom at $1.0542, and sterling is not far from a seven-month low. On Friday, the dollar index remained stable at 106.4.
“A push through 107 would provide technical evidence of trend continuation,” Capital.com analyst Kyle Rodda explained.
Surprisingly, only the ailing yen has put up much of a fight after a sharp rise in the Japanese currency on Tuesday afternoon fueled speculation that authorities had intervened.
There were no irregularities in Japanese money-market data that could have been caused by intervention. However, the change was noticeable enough to keep traders on their toes.
The yen was recently stable at 148.5 yen to the dollar. Gold was similarly stable at $1,822 per ounce, following nine days of losses due to rising global bond yields.
“This may be just a brief pause while we wait for labour market data and next week’s U.S. Treasury supply and CPI data,” said SocGen strategist Kit Juckes.
“If the labour market data are strong, pressure will return sooner than it did last year. I still think the Treasury market will take yields higher until something breaks in the system.”
