According to Kit Juckes, the global macroeconomic strategist of the French banking house Société Générale, the key interest rate for current events in the financial markets is US government bonds.
Juckes believes that until the market interest rate on 10-year bonds climbs to at least two percent, free capital will rotate in the markets between bonds, stocks, or other assets that guarantee a solid rate of short-term appreciation at acceptable risk. “There will be no peace in the markets until the interest rate on US government bonds rises to two percent,” Juckes said in his gloss.
According to him, it turns out that investors are very sensitive to fluctuations in the market valuation of bonds, which is reflected in the spillover of free funds to stock markets and back into bonds. Investors also respond to the rise in bond rates by shifting money from growth stocks to cyclical ones.
The recent rise in rates has also affected the Nasdaq technology index, which has weakened. In short, investors preferred a relatively decent bond yield over (from their point of view) risky technology stocks. This sensitivity is also reflected in the foreign exchange market, especially in the development of the exchange rate of the euro-dollar and dollar-yen currency pairs.
