Another day, another big jump up in US yields.
We wrote about the big move up in yields yesterday, noting that this is a big move from a yield of around 1.40% near the end of July.
What’s going on? Basically, improving optimism, both in the sense of the economy (the data has not been recessiony in the US) and hope that the tail risk scenarios in the Eurozone are unlikely (Spain rallied nearly 4% today!).
And if you don’t buy that panic is dissipating in the Eurozone, here’s an interesting paragraph from Morgan Stanley’s Global Currency Research Team:
According to weekly SNB [Swiss National Bank] data, Swiss currency reserves are no longer growing, suggesting that the capital flight out of the eurozone has come to a halt. The successful stabilisation of peripheral bond markets via ECB President Draghi’s verbal intervention has stopped deposit shifts into Switzerland, in our view. However, other FX market segments have not taken notice. Safe-haven currencies have remained in demand.