US stocks rebounded from the slump that followed the recent FOMC meeting. The DOW led gains up 1.76%, its best performance since March while the S&P rose 1.40%. The NASDAQ rose a comparatively modest 0.79% as it was held back by losses in key names such as Tesla and Amazon. Yield on 10Y USTs closed 5bps higher at 1.4886%.
Addressing the European Parliament on Monday, ECB President Christine Lagarde said spillover effects from heating US inflation would be limited in the euro area. With the ECB having decided to keep up the pace of bond purchases and shifted their view to acknowledge “balanced” economic risks, the position is in contrast to the Fed which acknowledged that inflation may run faster than previously expected. Yield on 10Y DBRs closed 3bps higher at -0.171% while the euro was firmer at $1.1919.
Asian stocks closed sharply higher on Tuesday recouping losses from last week’s slump. The NIKKEI led the rally up 312bps, the ASX gained 148bps while the CSI climbed 62bps high. The HANG SENG closed 37bps weaker reversing earlier gains.
Belarussian bonds plummeted following sanctions by the EU, US, and other countries over the forced landing of a passenger aircraft in May. The yield on 2031 bonds rose as high as 70bps during Monday’s trading to an all-time high of 8.23%. One of the more significant sanctions was placed on potash sales which net significant forex revenue as well as prohibit multilateral development banks from lending to the country. BELRUS 31s opened steadier on Tuesday, with yield hovering 8.17%.
China agreed in principle to reschedule Congo Republic’s debt, a move that could help bring back IMF funding. The IMF approved a three-year, $449 million programme in 2019 on the condition that long-term debt sustainability would be maintained. With the country particularly struggling with Chinese debt (about $2.4 billion), however the IMF had only disbursed $45 million. REPCON 29 was little changed on the news however, trading at 13.3% yield.