Financial markets have started April strongly and the rotations that characterised much of the first quarter have eased. The move higher in US Treasury yields that had triggered market and asset class shifts peaked at the end of March, briefly touching 1.75% in the US 10-year Treasury yields, before falling back to 1.55% by mid-April. In sympathy, the opening weeks of April have seen global equities rise c. 5%, the Dollar index fall -2.3% and Gold rise nearly 5%. For now, investors continue to look through the risk of COVID-19 virus mutations, vaccine concerns and infection surges in countries such as Brazil and India. Headline grabbing stories covering the blockage of the Suez Canal and collapse of US family office Archegos, also had little lasting influence on market sentiment.

Somewhat surprisingly, the reversal in US Treasury yields has taken place against a run of strong US data releases, however, there seems to be a series of reasons behind the move, not least a loss of momentum following the worst quarter for US government bonds since the 1980’s. Fundamentally government bond yields have already adjusted a great deal for stronger growth and inflation expectations, but they had also moved well ahead of the Federal Reserve’s path of future interest rate forecasts. Successful treasury auctions together with the Federal Reserve’s consistent message of no change in policy until significant progress is made towards their average inflation and full employment objectives, unsettled market positioning that was looking increasingly stretched.

Read the whole note here

 

 

 

 

Disclaimer: The value of investments and any income from them can go down as well as up and investors may not receive back their original investment amount. This communication is for information purposes only. It is not intended as a personal recommendation of particular financial instruments or strategies and it does not provide individually tailored investment advice. This document provides the views of the London & Capital Investment Team examining the fundamental background, economic outlook and possible effect on asset markets. This document is not an invitation to subscribe and is by way of information only. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be solely relied on in making an investment or other decision. If you are considering investing, you should consult your London & Capital adviser. The views expressed herein are those at the time of publication and are subject to change. Correct at time of going to press.
London and Capital Asset Management Limited is authorised and regulated by the financial conduct authority, 12 Endeavour square, London, E20 1JN. Firm reference number 143286. Registered in England and wales, company number 02112588. © London and Capital Asset Management Limited. All rights reserved. London and Capital Wealth Advisers Limited is authorised and regulated by the UK Financial Conduct Authority (firm reference number 120776) and by the U.S. Securities and Exchange Commission of 100 F street, NE Washington, DC 20549, with sec firm reference number 801-63787. Registered in England and Wales, company number 02080604. © London and Capital Wealth Advisers Limited. All rights reserved.