The steep drop in government bonds continued through the mid-week. Neither Stockholders nor the Federal Reserve expected yields to approach 5.0%. Globally, government bond markets are weak. They are reacting negatively to the strength of the U.S. dollar.
Foreign investors may buy the U.S. dollar ETFs including UUP and DXY.
Germany’s 10-year Bund yield is at a more than five-month high. The eurozone inflation is worrying bond markets, along with an excess supply of bonds. In Canada, the Loonie (USD-CAD) briefly rebounded toward $0.70 only to fall again. The currency reacted positively to Prime Minister Trudeau saying he would resign after the Liberal Party found a new leader.
Unfortunately, central banks declared victory in their fight against inflation in 2024. In response, they started to cut interest rates. Canada cut rates the most aggressively, outpacing the Eurozone and the U.S. But food and shelter prices are still rising. Consumers potentially cut back on spending. Costco (COST) and Walmart (WMT), however, likely increased their market share. Conversely, firms like Target (TGT), Gap (GAP), and Nike (NKE) faced slower sales. Nike recently reported a 10% sales drop in its fiscal first quarter.
Add long-term bond ETFs to the watch list. Eventually, the 7-10 Year Treasury Bond ETF (IEF) and 20+ Year ETF (TLT) will bounce back.