Markets finished the week on an upbeat note following an action-packed week filled with event risks and central bank decisions. The Dow Jones Industrial Average[1] (DJIA) gained 1.42%, while the tech-heavy Nasdaq[2] 100 closed the week out north of 3%. In Asia, Japan’s Nikkei 225[3] rose 2.49%, but Chinese stocks underperformed the broader equity market, with the CSI 300 slipping 1.35%. Australia’s ASX 200[4] rose nearly 2%.
The US Dollar[5] DXY index inched higher despite a drop in Treasury yields. Bond traders bought up Treasuries through the week even after the Federal Reserve opted to begin tapering balance sheet growth later this month. The rate-sensitive 5-year yield put in its biggest drop since June, while the 30-year rate fell at a slower pace. Friday’s non-farm payrolls print resulted in yields accelerating lower to finish out the week. The strong payrolls data wasn’t enough to lift Fed rate hike bets, with the chance for a 25 basis point rate hike for the June 2022 meeting dropping from 45.8% to 41.9% over the past week, according to Fed funds futures.
Meanwhile, the Treasury Department’s latest auction schedule revealed a reduction in its monthly offerings across 2-, 3- and 5-year notes. That suggests the government’s post-pandemic funding needs are beginning to ease. The reduced supply may already be a factor in rising bond prices. This week will see a 3- and 10-year note auction on Tuesday for $36 billion and $39 billion, respectively. Wednesday will bring a $25 billion 30-year bond auction. These offerings will help shed light on bond traders’ post-FOMC[6] appetite for government debt.
After a sharp drop in response to the surprise Bank of England (BOE) rate decision, the
