It seemed that the fixed income bears returned from their Easter hibernation yesterday as the selling pressure on fixed income resumed. No one seemed to point to a single headline to explain the reversal, so investors were treated to a range of possible reasons ranging from supply to a shift in ECB policy. Without wishing to get into too much detail on the explanations, I think supply( 20 Y looms) seems to be the most obvious explanation, especially given that fixed income showed minimal reaction to the weakness in stocks.

Should we be surprised? Not really, after all; the year to date has been dominated by bearish in fixed income markets, so after a decent rally in the last few sessions, sellers were only too happy to step back into the market. Bunds seemed to bear the brunt of the selling initially as they continued to underperform USTs.

Bunds have managed to recover a good chunk of yesterday’s losses; as to why Bunds are rallying – other than equity weakness – I don’t have much to offer you.

Perhaps when it comes to equities, it is a case of the reopen being priced for perfection and with Covid rearing its ugly head, perfection doesn’t especially like that kind of company.

The point, in fact, It looks like some big outflows from Nifty are causing a spike in USDINR. Investors continue to worry about the worsening covid-19 situation and ahead of the Indian holiday on Wednesday, and it seems this is reflected in the sentiment. USDINR 1m moved from 75.10 to highs of 75.35 so far as Nifty moved from +0.5% to -0.5% in a span of 30 minutes.

Today’s meeting was about just as straightforward as a Bank Indonesia policy meetings can get.BI kept the policy rate on hold at 3.5% – expected unanimously by consensus – as higher global yields and weaker IDR limit options.

OIL

It would be easy to conclude EURO down oil down ( stronger USD), but there is likely more to it than meets the eye as Iran Optimism Could Pressure Oil.

An Iranian government spokesman, quoted by Bloomberg, says nuclear talks have been positive and that Iran is “cautiously hopeful about the revival of the nuclear deal”. The US National Security Adviser said over the weekend that talks have been constructive. The global macro and oil demand outlook are more important for oil prices. Still, a lifting of US sanctions and an accelerated return to total production for Iran would mean some near/medium-term pressure on prices.

Published by Stephen Innes, Chief Global Markets Strategist at Axi