Doves rule market post-NFP, HSBC lowers yield outlook to lowest

Who let the doves out?

Its way weaker than expected NFP report last Friday that has released doves in the market, with analysts cutting their outlook for global yields and market participants pushing high yield and commodity currencies 400 pips higher.

In wake of dovish mood, HSBC became the latest investment bank to slash rate hike expectation and calling yields to drop within sight of their lowest levels on record.

With global growth faltering, across world, the outlook supported by weaker than expected economic releases in japan and in Germany, HSBC has lowered its expectation for future yields. Japanese Machinery to orders dropped to -3.5% for 12 months to August and German exports weaken by -5.2% in August.

HSBC expects European Central bank to turn more dovish going forward and US Federal Reserve to hold rates on hold much longer than originally anticipated. With such expectation, the bank has cut its yield outlook for German 10 year bund to 0.2% and 1.5% for US 10 year yield from its previous forecast of 0.95% and 2.5%.

German 10 year bund is currently trading at 0.56% and US 10 year above 2%.