MUFG: Global Duration Selloff Intensifies as Oil and Data Reprice Rates
The US 2-year yield is up around 60bp this month, close to the move seen in March, as strong September PMIs, hawkish Fed commentary and renewed oil strength reinforce tightening expectations. Brent has rebounded nearly 6% from yesterday’s lows after Iran’s UN speech, while reports of a possible US diesel export ban have added to energy-market pressure. A weak 5-year Treasury auction also weighed, pricing at 5.033%, the highest yield since June 2006, with a bid-to-cover ratio of 2.21 versus a 2.33 average. The move is increasingly being treated as a global duration selloff rather than a France-specific story, even as the OAT-Bund spread widens to around 110bp, the largest since 2012. Rising fast-money losses may also create pressure to unwind profitable positions elsewhere, putting FX carry trades at risk. In currencies, EUR/USD support is seen around 1.1340, with a break opening the 1.10-1.12 area, while Japanese officials are again signalling intervention risk as USD/JPY approaches 160.
The US 2-year yield is up around 60bp this month, close to the move seen in March, as strong September PMIs, hawkish Fed commentary and renewed oil strength reinforce tightening expectations. Brent has rebounded nearly 6% from yesterday’s lows after Iran’s UN speech, while reports of a possible US diesel export ban have added to energy-market pressure. 33 average. The move is increasingly being treated as a global duration selloff rather than a France-specific story, even as the OAT-Bund spread widens to around 110bp, the largest since 2012.
Rising fast-money losses may also create pressure to unwind profitable positions elsewhere, putting FX carry trades at risk. 12 area, while Japanese officials are again signalling intervention risk as USD/JPY approaches 160.