Fiscal stimulus and yields provide support to the greenback

The American dollar eased heading into the weekly close against most major rivals, although retained its dominant strength. US Treasury yields provided support to the greenback, reaching fresh one-year highs. The bond market volatility is expected to continue leading the way this week.

Wall Street closed mixed on Friday, with the DJIA and the S&P reaching all-time highs, but the Nasdaq falling amid the persistent sell-off in the tech sector.

Vaccine rollout and fiscal stimulus lift hopes for a sooner economic comeback in the US.

The main event this week is the US Federal Reserve Monetary Policy meeting. The central bank is expected to announce its decision next Wednesday, although it’s widely anticipated to remain on hold.

BOND BULLISH
Banks are preparing for further disinflation, not inflation
US Treasuries to remain well bid amid COVID-19 resurgence
Speculation on lower rates as long as US economy struggles to recover
European Commission to undertake borrowing on the capital markets for first time
Fed's strategy is to avoid inflation expectations slipping
Central bankers don’t have policy tools against asset inflation
If interest rates go down, bond prices go up
Massive fiscal stimulus programs worldwide expected.
Political chaos in Europe forces capital into US bonds.

BOND BEARISH
Yields set to rise further in the autumn after ‘reopening’
Another stimulus, more than $2 trillion
Joe Biden to push additional relief packages, implying higher government debt
Rising interest rates to torpedo the bull market
Billionaire hedge fund manager warns of 10% inflation
The Fed chasing inflation, nominal GDP could rise big time
Fed can control yield curve
Central banks are nowhere close to raising rates
Ratio of downgrades to upgrades in credit ratings of leveraged loans spikes to a record level
Firsts overdue rents and loans
A new normal in the US
EM countries to sell US bonds in order to help their econony and currencies
Central banks moving to zero rates