Will US bond yields and the dollar exchange rate help you catch your breath? Key inflation data coming this week

Last week, the peak in the yield of 10-year US bonds was 4,35%, which was the highest interest rate since November 2023. This, in turn, means that investors have significantly withdrawn their expectations for a cut since the end of December, when the yield was 3,78%. interest rates by FED and a greater slowdown of the American economy in the coming quarters. Nevertheless, Friday brought a return from 4,35% to 4,29%, and today at the beginning of the week the profitability could drop even to 4,22%. We may be witnessing a turnaround in the yields of 10-year US bonds in a week with key macro data from the US economy.

Risky assets are high, despite high profitability

As we have seen in recent weeks, as bond yields increased, risky assets such as shares also rose in price kryptowaluty. This is a relatively rarely observed phenomenon and could result from better-than-expected company results and an increase in liquidity in the form of bank reserves in the USA, which increased by almost USD 550 billion in a year despite the ongoing QT (thanks to the decline in reverse repo operations). This may increase risk appetite despite the increase in profitability. What we'll see now is if yields fall, will the market use this to further engage in risk through lower discount rates?

Profitability and the US dollar exchange rate

Interest rates on US bonds may have an impact on the US dollar, which has remained relatively strong recently and only last week brought some change in the quotations. Therefore, the mentioned risky assets also gained in the relatively strong dollar. This week may be crucial, due to the US PCE inflation published on Thursday, for the further fate of the US dollar exchange rate.

In this whole market puzzle, where the appetite for risk, among others, thanks to the increase in reserves, it remains relatively high, there is no element of lower profitability and a weaker US dollar. If this factor appears later in the week, it will be possible to say that all markets have "synchronised". Otherwise, with a further increase in yields and a strong USD, a further rally in risky assets may be in doubt.