Market Comment | Bonds regain favor

Summary

Demand for sovereign bonds returned this week, with a heightened geopolitical risk (following the oil field attack), liquidity stress in the US repo market and central banks easing their rhetoric. In the coming days, markets will turn their attention to the trade deal.

Key points

• Key points:
• Geopolitical risk and supply disruption prevent oil price corrections
• Markets expect further central bank easing. Markets still price in 72% probability of a 25bps Fed interest rate cut in December, while expectations for an additional depo rate cut by the ECB remain on the table.
• Fed intervenes to stem liquidity stress in US money market

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