Rates as of 0500 GMT
Yesterday was generally a riskoff day, for two reasons. One, the virus situation continues to worsen, as weve noted many times. New virus cases are rising both globally and in the G10 countries more of that in my Weekly Outlook, coming soon. Secondly, as output recovers to prepandemic levels, central banks are starting to turn off the taps, as we saw Wednesday with the Reserve Bank of New Zealand RBNZ deciding to end its QE program and with the Bank of Canada cutting its bond purchases by CAD 1bn a week. This has raised the question of how long we can expect the current regime of extraordinary monetary policy around the globe to last.
As a result, everything fell US stocks fell, oil fell, and US Treasury yields fell. Yield curves flattened too, which is another sign of fear of diminishing growth expectations.
NZD was the bestperforming currency after the NZ consumer price index soared past market expectations and out of the Reserve Bank of New Zealand RBNZs target range. This perhaps explains why the RBNZ decided at Wednesdays meeting to stop its quantitative easing program and reinforces the idea that theyre likely to start hiking rates sooner rather than later.
As a result, the market is now pricing in two whole rate cuts this year a big jump even from Wednesday following the RBNZ meeting.
GBP also outperformed after some hawkish words by Bank of England Monetary Policy Committee MPC external member Saunders. He said it may…