2-year Treasury yields -6.7 bps to 2.435%
5-year Treasury yields -5.4 bps to 2.649%
10-year Treasury yields -2.8 bps to 2.581%
30-year Treasury yields -1.1 bps to 2.621%

That might be what is offering some respite to stocks, which are hoping to snap quite a modest two-day decline. European equities holding higher with US futures also up around 0.3% at the moment.
I’m not going to attribute much to the drop in bond yields today as it comes on the back of a four-day climb in Treasuries.
In the FX space, the dollar is mostly calmer in a bit of a choppy session but mostly holding little changed. The aussie and kiwi are the notable laggards but have kept near the lows for the day since Asia trading already.

Fiscal
policy is the use of government spending and tax policies to influence economic
conditions. Like the central bank, the government can pursue an expansionary or
contractionary fiscal policy.

 

When the
economy is weak the government can lower taxes to encourage people to spend or
invest because their disposable income (income minus taxes) increases making
them feel wealthier.

 

This can
help demand to grow making businesses to hire workers and causing even more
demand as people start to see a better environment eventually helping the
overall economy. The government can also increase spending like for example for
infrastructure that increases employment pushing up demand and overall growth.

Such expansionary
fiscal policy is associated with deficit spending. This means that the
government spends more than it earns through taxes and borrows the rest from
the open market selling bonds. This eventually creates debt that will need to
be repaid in the future.

 

On the other
hand, when the economy is strong the government can increase taxes and lower
spending therefore slowing down demand and growth. Unfortunately,
contractionary fiscal policy is rarely used because it’s politically unpopular
as people most likely wouldn’t want to vote for a government that raises taxes.
This is one of the reasons why government debt eventually grows gradually.

 

Generally,
it’s the central bank that pursues a contractionary monetary policy to slow
demand and growth and that’s also why an independent central bank is vital as
it’s not aiming for political approval but just to make sure the economy
remains stable.

 

This article
was written by Giuseppe Dellamotta.

Headlines:The bond market rout remains unrelentingChina state refiners reportedly staying away from new Russian oil tradesECB’s Lane: Important not to overreact to inflation surgeECB’s Panetta: Policy action now against inflation risks crashing the economyRBA’s Bullock: Expect some upward revision to our inflation forecastsRBA’s Kent: Some other forces likely to push inflation higher stillUS MBA mortgage applications w.e. 1 April -6.3% vs -6.8% priorEurozone February PPI +1.1% vs +1.3% m/m expectedGermany February factory orders -2.2% vs -0.2% m/m expectedMarkets:EUR leads, CHF lags on the dayEuropean equities lower; S&P 500 futures down 0.9%US 10-year yields up 7.4 bps to 2.627%Gold down 0.1% to $1,921.20WTI up 1.6% to $103.60Bitcoin down 2.1% to $44,910It was a quiet session for the most part but there were some decent moves in the market as we continue to see the bond selloff deepen. Meanwhile, equities tracked lower as stocks remain on the defensive after more hawkish Fed talk from Brainard yesterday.European indices are down by nearly 2% across the board with US futures also sinking further by roughly 1%.The moves didn’t quite translate into any meaningful action in FX though. Major currencies remain in a rather push and pull mood with the dollar seeing a slight advance early on only to give that all back to be little changed now.EUR/USD fell from 1.0890 to 1.0875 before clawing its way back up to 1.0910 levels currently. GBP/USD also slid to 1.3045 only to climb to 1.3100 and then fall back to 1.3070 at the moment.The yen remains an interest point amid the bond market rout but USD/JPY is seen hugging 123.70-90 levels for the most part during the session.The FOMC meeting minutes later in the day will be a key risk event to watch out for as what is happening in the bond market continues to be where all the action is at – highlighting the battle between central banks and inflation.

Can’t respond to current high inflationECB orientation is geared towards the medium-termAgain, this does not sound like someone who is advocating for tighter policy sooner rather than later. Is it that surprising? Not in the slightest. The central bank continues to toy with market hopes but it is increasingly evident that they don’t really have the stomach for tighter policy when push comes to shove.In turn, this could be a headwind for the euro in the months ahead as the Fed begins to flex its muscles.

It is being reported that China’s state refiners are honouring existing Russian oil contracts but are staying away from new ones despite steep discounts being offered.Asia’s largest refiner, Sinopec, along with CNOOC, PetroChina and Sinochem are said to be staying on the sidelines in trading fresh cargoes from Russia for loadings in May. The sources say that none of the Chinese state refiners want to be „singled out as a buyer of Russian oil“.For some context, China is the top buyer of Russian crude at around 1.6 million barrels per day, half of which is supplied via pipelines under contracts between both governments.Well, the way I’m seeing it is that a lot of this looks to be reputational risks and just avoiding any unwanted scrutiny as the spotlight continues to shine brightly on Russia. But given time, I’d expect normal dealings to continue. I’m pretty sure it’s not an economic risk that China is willing to take by having to look to diversify its crude imports at a time like this.

Prior -6.8%Market index 398.5 vs 425.1 priorPurchase index 258.1 vs 267.1 priorRefinancing index 1,166.3 vs 1,295.1 prior30-year mortgage rate 4.90% vs 4.80% priorMortgage applications continue to drop as home borrowing costs continue to surge higher, leading to a significant fall in both purchases and refinancing activity over the past few months. Since the start of the year, mortgage rates have risen by nearly 1.6% and that is the quickest run-up in costs since 1994.

Process not going as fast, energetically as Moscow would likeWell, that’s another day without any meaningful progress. As mentioned before, markets have become apathetic to the headlines now and it would take a serious development to really draw attention. Otherwise, carry on as you will.

Support and
resistance is THE most popular and used technical analysis concept. It’s based
on the fact that price tends to react to certain levels and those same levels
can be traded as the price gets rejected.

So, if traders expect a level to hold,
they will trade

This relates to the likely imminent announcement from earlier here.The matter is still being discussed as the details are yet to be sorted out but it will be the first foray by the EU into sanctioning Russian energy, although it doesn’t touch on oil and gas just yet – which are the more important on

Does not reject possibility of Putin-Zelensky meetingBut only possible once there has been an agreementRussia not in a rush to switch all payments in rubles for exportsWell, negotiations continue to drag on and it remains to be seen if an agreement can be struck between the two sides. For now, marke