Financial Markets Today

Yields of government treasuries of developed markets (DMs) declined to new 14-months low, with an inversion in the U.S. yield curve as the 10yr U.S. treasury dropped below the 3yr treasury yield, its first since 2007 and a possible indication of a recession in economic growth. This comes as the German 10yr treasury declined into negative territory, its first since October 2016 on the back of rising concerns of a global slowdown in economic growth in 2019 with the U.S. Federal Reserve Bank, Bank of England (BOE) and the European Central Bank (ECB) all deepening their dovish monetary stances and lowering economic growth outlook in their respective economies earlier in the week. Yields of the U.S. 10yr treasury, UK 10yr treasury and French 10yr treasury all dropped to ca +2.435%, +1.008% and +0.3426% respectively, with both the 10yrs German and Japanese treasuries in negative territory of ca -0.023% and -0.087% respectively.

We expect continued volatility in global financial markets in the near term as investors’ continue to weigh the impact of the deepened dovish stances of most Central Banks of developed economies on the global financial markets amid rising investors’ interest in safe-haven risk assets of DMs in the near term. We also expect this to be potentially beneficial for capital flows to Emerging (EMs) and Frontier (FMs) markets in the 2019 vs H2 2018, particularly commodity dependent economies like Nigeria, should Brent crude oil price remain elevated above current levels of ca $66.44 per barrel.

Financial Markets Update – 22 March 2019

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