Investors Are on Edge Over Bond Markets

Much of the European market's focus will likely remain on currency and bond markets, as investors continue to question the pace at which global central banks will tighten monetary policy.

Author:: Edward Hardy
Publish date:: Jul 11, 2017 8:58 AM EDT

Much of the European market's focus will likely remain on currency and bond markets, however, as investors continue to question the pace at which global central banks will tighten monetary policy amid a firming economic recovery.

In Europe, the single currency drifted to 1.1388 against the U.S. dollar while the pound slipped to 1.2874 as the greenback gained in Asia trading amid modestly higher bond yields.

The bond market moves, however, have been far less disruptive this week than they were last, when benchmark 10-year government bond rates in Germany, Britain and the United States surged in unison, igniting parallels to the so-called 'Taper Tantrum' of 2013, when a 140 basis point rise in 10-year U.S. Treasuries pushed the S&P 500 into a 5% loss.

Yellen's testimony to Congress later this week could settle equity market nerves in that respect, particularly if she is able to assure markets that the Fed's rate path hasn't changed over the past few weeks despite firming economic data and an improving labor market.

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