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Monday, 8 June 2015

Bonds Fall Sharply On Panic ; Metals Slide

Precious Metals Slide Back Despite Bond Meltdown

Although many market participants’ actions (and a great deal of financial punditry) have taken on a panicked character regarding the global bond market, neither commodities nor equities were the beneficiary of this creeping illiquidity in government bonds around the world. Although the precious metals initially moved higher on Monday morning, the spot prices pulled back to about unchanged by midday before kicking off a modest selling spree throughout the week. U.S. shares recovered from an early dip to close about 0.25% higher on Monday thanks to Intel’s acquisition of Altera for $16.7 billion, boosting the latter’s shares by 6% on the day. Silver sank back below the $17 mark after an early 30­cent jump, while platinum lost about 0.75% to close just above $1,105/oz.

Tuesday’s action was dominated by ECB President Mario Draghi’s comments that investors ought to expect and accept a period of increased volatility; this helped drive the 6-­week rout of government bonds, sending the yields on many country’s benchmark bonds 10 to 15 basis points higher. Despite Draghi’s optimism about the effectiveness of ECB QE and the ongoing impasse with Greece, the 10-­year German Bund yield spiked to a yearly high of 0.95% following his comments. (Recall that this comes after 10­-year Bund yields settled just below 0.05% as recently as mid-­April.) Meantime, 10­-year U.S. Treasury yields hit 2.40% before easing back slightly. Read More

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