US: Risk on supported by dying down of geopolitical tensions - ANZ

Analysts at ANZ explains that the latest mild bout of “risk-on” that has followed the apparent dying down of US/North Korean tensions (or at least dying down of the headlines) have, in turn helped lift the USD and stock markets, and bond yields a touch.

Key Quotes

“By all means, markets are right to be paring back on some of the panic after the White House took steps on Sunday to reassure us that nuclear war is not imminent. But at the same time, having ratcheted up the rhetoric this far, it is hard to see either side backing down significantly and we doubt we’ve seen the last of this “issue”. To us, geopolitics remains a key thematic, and along with secular low inflation, will keep a lid on policy rates and bond yields. With regards to inflation, if the common factor is global and secular, that implies we are likely to see more rate convergence as markets focus on long run neutral rates.”