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Aside from all the geopolitical risk, yesterday’s trading was fraught because the bond market was closed for a minor US holiday. That created an odd liquidity profile and uncertain market signals.

When fixed income trading reopened in Asia, yields plunged but had been creeping back up since. Now that we’re back to peak US liquidity, there is some buying in bonds again as US 10-year yields have fallen to 4.67% from 4.71%.

The market isn’t just digesting the Middle East either, the Fed’s Logan yesterday indicated that the rise in long-dated yields means the Fed won’t have to do as much. That dovish commentary is bond positive and dollar negative.

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It’s all going to take some time to sort out but the latest move in bonds is weakening the dollar broadly, and has pushed EUR/USD back close to the highs of the day.

EURUSD 10 mins

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