Kornelius Purps Yields Quotations

What we are seeing currently is that it's not a one-way road for strong economic data. Ten-year yields could fall to 3.35 percent in a month.

Assume that a time machine is beaming you back to Monday morning. You start the week with the impression of an unexpectedly strong 274k US payroll report in mind. In addition, a clairvoyant tells you that: 1) US retail sales surged by 1.4% m-o-m in April, 2) German growth advanced by 4% q-o-q annualized in Q1 2005, 3) speculation about a revaluation of the Renminbi will intensify, 4) the oil price will fall by about USD 3.50 per barrel this week, 5) and the US Treasury will sell USD 51 bn in Treasury Notes. You make up your mind and conclude that in this environment yields need to go up. At least 99 out of 100 market participants with the same information would have shared your view. But reality is different. Yields are down and down and down again. These are Schwarzenegger markets, no one can beat them.

We had positive inflation data out of Europe, and the U.S. as well. It's the starting point for yields to come down again.

In all likelihood, disappointing data will at some point in time dampen rate hike expectations. There's a reasonably good chance for yields to move substantially lower over the course of this year.

The market is under pressure at the moment, there's no question about that. This means yields at the long end will rise.