Risk aversion sentiment in the market recedes, European and American bonds fall one after another

According to the VZON Financial APP, as the panic that swept global markets earlier this week continues to dissipate, government bonds in the United States and Europe have fallen. German bonds led the decline, with yields rising by at least 5 basis points across the board, erasing the losses since last Friday. As the money market unwinds bets on a significant rate cut by the Federal Reserve this year, U.S. Treasuries have also weakened.

These are early signs of the market gradually returning to normalcy after the historic turmoil of recent days. Unexpectedly weak U.S. employment data, coupled with a rate hike by the Bank of Japan, have disrupted global markets, prompting investors to turn to safe-haven assets.

Andrew Ticehurst, interest rate strategist at Nomura Holdings, said, "The market is now trying to establish a new normal. We are in a very turbulent consolidation period."

Nevertheless, the turmoil continues to cast a shadow over the market. Investors suggest that the bond market may continue to be influenced by the stock market, and if there is a new stock market sell-off, they will flock to the safety of high-quality sovereign bond markets.

Michael Brown, strategist at Pepperstone Ltd., said, "Volatility remains high as participants are still somewhat nervous, and the stock market rebound still looks a bit fragile." He added that until the market stabilizes, fixed income may still represent "risk preference."

Economic Recession Concerns

The market is also reducing bets on the Federal Reserve significantly easing policy, a view supported after the employment report was released last Friday.

The market currently expects the Fed to cut rates by over 100 basis points this year, compared to the expectation of around 150 basis points two days ago when traders were betting heavily on a U.S. recession.

As panic subsides, the market is reducing bets on a significant rate cut by the Federal Reserve

The Franklin Templeton Institute suggests that investors take profits on recent gains in U.S. Treasuries, although it is still too early to assert that the economy is heading into a recession. Others believe the threat is more imminent.

Peter Berezin, Chief Global Strategist at BCA Research, said, "I believe we will fall into a recession later this year or early next year. Unfortunately, this is just the beginning of a deteriorating stock market environment."