Global bond yields slide as stocks rebound, US data, bitcoin rallies

US stocks breathed a tentative sigh of relief now that the bond market selloff appears to be taking a break.  In just a few weeks, Wall Street has gone from pricing in a gradual tightening of policy to a hurry-up offense that could deliver 4 to 5 rate hikes this year and a balance sheet reduction kickoff this spring.  Fed tightening expectations have been overdone and investors are now scaling back into risky assets.

US data

Investors quickly shrugged off a rather hot initial jobless claims report that rose to the highest level since October.  Filings for jobless claims increased by 55,000 to 286,000, much higher than the expected forecast of 225,000. Holiday and covid closures were at play and likely impacted the high jobless claims reading.

The hot housing market saw a rare miss with existing home sales as record-low inventories and surging mortgage rates led to a slowdown in purchases.  This is not the top for the housing market as some seasonal factors and Omicron likely weighed on the decline in home sales. For the full-year sales hit 6.12 million, an increase of 8.5% from 2020, which was the best year since 2006.  The housing market is not slowing down just yet; that may happen after a couple of Fed rate hikes.

Bitcoin retreats on Russian threat

Bitcoin shed earlier gains after the Russian central bank proposed a ban over the use and mining of cryptocurrencies on Russian territory, claiming the digital currency poses a risk to the financial stability and monetary policy sovereignty.  The Russian ruble has been steadily declining over the past couple of decades, which made bitcoin an attractive investment for many Russians in recent years.  Russia has been a top-three country for Bitcoin mining, so if this proposal passes, Bitcoin could slide below the USD 40,000 level.

Cryptos remain the perennial risky asset and if Treasury yields continue to decline, that should be good news for bitcoin.

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