Markets Overview

  • ASX SPI 200 futures up 0.4% to 7,413.00
  • Dow Average up 0.4% to 34,861.24
  • Aussie down 0.1% to 0.7505 per US$
  • U.S. 10-year yield rose 10.3bps to 2.4731%
  • Australia 3-year bond yield rose 2bps to 2.22%
  • Australia 10-year bond yield rose 1bp to 2.78%
  • Gold spot little changed at $1,958.29
  • Brent futures up 1.4% to $120.65/bbl

Economic Events

It was the Fedspeak that did it. Last week, Federal Reserve Chairman Jerome Powell once again pulled off his signature trick of persuading markets that the hawkish statement they had just read wasn’t all that hawkish after all. This week Powell and other Fed officials pointed out that actually they are thinking about 50-bp hikes, and possibly a train of them.

That sense of increased urgency communicated itself to the yield curve. The Bloomberg U.S. Treasury Total Return index was on course for its worst week since September 2019. Eurodollar traders are now pricing two half-point hikes over the next three meetings.

The curve flattened as well. The 3s10s, 5s10s and 7s10s curves are already inverted and 2s10s is only 18 bps away. Real yields have lagged the selloff in nominals, suggesting it’s at least partly driven by inflation concerns.

Amid the bond rout, stocks have proven remarkably resilient. That may be because they already had a steep selloff earlier in the year that pushed valuations back below their five-year average, albeit briefly. But it also suggests that the yield curve’s credibility as a recession-warning indicator is on the wane.

Other News

A Vietnamese man who tried to row through the Bay of Bengal from Thailand to India on an inflatable rubber dinghy was arrested after being rescued off the Thai coast on Wednesday.

Ho Huang Hung, 37, embarked on the dangerous 2,000km journey from Phuket to meet his wife, who works in the Indian city of Mumbai. They had been unable to meet each other for the past two years due to Covid-19 pandemic restrictions.

He was found near the Similan Islands, about 80km off the Thai mainland, after he had spent 18 days alone at sea, and as a cyclone was brewing in the Bay of Bengal. He was rescued by Thailand’s navy after a fisherman spotted him floating on a small yellow and blue boat.

Mr Ho took a flight from Saigon to Bangkok on 2 March, and planned to take a connecting flight to Mumbai. However, he could not get a visa to India.

So instead, he took a bus to Phuket and started his boat journey around 5 March. The man set sail with only 10 packets of noodles, a tank of water and some luggage. He didn’t have any maps or a compass, authorities said.