Daily Market Commentary 23rd March 2021

The US found that the AstraZeneca Drug was 79% effective and safe from causing blood clots, which boosted global markets. US 10 Year Bond Yields settled back off last week highs, falling to 1.68%, which was enough to allow equities to rebound off the previous sell-off. The rising rates will translate into the mortgage markets, as a leading index, and US Existing Home Sales sharply contracted by 6.6%. The Chicago Fed National Activity Index also turned negative and markets do remain uncertain. The softer Bond Yields also saw the US Dollar retreat, with the EUR jumping to 1.1940, while the GBP pushed 1.3860.

The big market news in Europe was the sudden collapse of the Turkish Lira, plunging 17%, following the Turkish leader sacking of the Central Bank Governor. President Erdogan reacted to the Banks 200bps increase in interest rates, in a dramatic fashion, that was a shock to markets. The world has been consumed by high debt and Central bank enforced record low interest rates, and this may well inevitably result in a collapse in some currency?

The RBNZ continues to support the suppression of interest rates, by massive intervention in the Bond markets, keeping the lid on rates for the time being. The longer end of the curve is much harder for the Central banks to control and this will be where the future will be revealed. Bonds will remain in focus as markets await the testimony of Fed Chair Powell in front of the US Congress.