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Market Talk – July 25, 2015

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Commodities and their currencies continued to suffer this past week to complete what has been probably the worst week in a very long time. Oil lost another 1% leaving TWI at $47.95, whilst Brent lost 1.5% last seen at $54.45. Natural Gas is still unable to show any signs of recovery and was last trading at 2.785 (another 1% drop). Commodity based currencies (A$, Rouble, C$, etc.) all had very bad days with the worst being the Russian Rouble, which is down on the day -2.35% at one stage.

Asian equities closed weaker on Friday as Europe followed; late this evening the U.S. markets were also heading into negative territory. The Dow has been unable to make new highs in dollar terms, but the underlying support has come from foreign investors on a currency play. Even the huge rally seen in Amazon was not enough to turn the stock market positive by the end of the day, yet Amazon is demonstrating the technology shift as it goes toe-to-toe with Walmart for the title of “biggest sales organization”. The flight to quality continues in the bond market and the U.S. Treasury curve continues to benefit as money leaves the stock market.

The 2yr Note was last trading -1.6bp at 0.678% whilst 10s and 30s were trading 2.26 and 2.96 respectively. The spread U.S./German TY/RX spread was unchanged at 156bp.

Few traders are starting to talk JGB yields again as Western economic numbers start to disappoint. Just as a number of houses were building short positions, the bond market turns positive and closes its best week in months.