Bond investors who suffered losses during the recent sell-off will be closely watching market moves and economic data for anything that could spark a rebound. They will be paying particularly close attention to the oil price, whose sharp rise this year has been a key driver of inflation fears, especially given that crude and US Treasuries are locked in their tightest relationship since the first Gulf war in 1990. Brent crude briefly dipped below the $100 mark on Friday after a G7 agreement to release crude and diesel reserves, although it later recovered to around $102.
European investors will also be hoping that there are no fresh political surprises to hit Eurozone government bonds next week, particularly given the market concerns swirling around France’s finances. “Our worry remains around deficits as we do not see any major economy taking steps to control deficits over the next 12 months,” said Jefferies’ Mohit Kumar. A boost could come from any weaker than expected US economic data. Numbers released on Friday showed the economy added fewer-than-expected 29,000 jobs in September.
The University of Michigan consumer sentiment report next week will be watched more closely than usual after September’s numbers sparked a significant sell-off in the US bond market. The final reading of the September survey showed consumer sentiment had fallen to a four-month low, while inflation expectations rose to their highest since May. Evidence of further inflation fears could spark another round of selling.
Source: Financial Times Markets · Summarized by HeadlinesBriefing