The charts that matter: bond yields soar

published 2 October 2021

Welcome back.

On this week’s magazine cover we take a look at the legacy of Angela Merkel, Germany’s leader who is stepping down after 16 years. Her approval rating of 64% attests to her “steadying influence in an age of turbulence”, says Simon Wilson. But do her achievements live up to her ratings?

Our big investment feature this week is Stephen Connolly writing about cybersecurity. It’s fair to say that cybercriminals have never had it so good. The pandemic has pushed more of our lives online, and the internet has “never been a better hunting ground for data, money and weak access points in corporate networks”, he says.

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So there are plenty of opportunities for investors in combatting them, and Stephen picks some of the best bets to buy now. If you’re not already a subscriber to MoneyWeek magazine, sign up here and get your first six issues free.

This week’s “Too Embarrassed To Ask” video explains what “moral hazard” is. The term comes from the insurance industry in the 18th century. But what does it mean today – and why is it still so relevant? Find out exactly what it means here.

And in this week’s podcast, Merryn talks to Gary Channon of Phoenix Asset Management about his investment style and the balance between diversification and performance. Plus, capital allocation and the firms that get it right – and the firms that don't. It’s a fascinating listen – hear what they have to say here.

Oh and John popped up on The Week Unwrapped podcast this week talking about gene editing, comedy copyright and “manifesting” – if you’re curious, have a listen here.

Here are the links for this week’s editions of Money Morning and other web articles you may have missed:

Monday Money Morning: The UK stockmarket is cheap – but is it cheap for good reasons?
Tuesday Money Morning: Has passive investing created a stockmarket bubble?
Merryn’s blog: Why we will be reliant on fossil fuels for a long time to come
Web article: Why are people panicking about fuel shortages?
Wednesday Money Morning: The investment landscape is getting messy – what should you own now?
Web article: What do higher oil prices mean for investors?
Thursday Money Morning: Rising bond yields are unnerving markets and it could get worse before it gets better
Web article: What is the US “debt ceiling” and what happens if it is not raised?
Friday Money Morning: China’s energy crunch could export inflation around the globe
Web article: Furlough is ending – will unemployment spike?
Cryptocurrency roundup: Cryptocurrency roundup: bitcoin shrugs off China's ban

Now for the charts of the week.

The charts that matter

Gold fell further as concerns over tighter money continued, but it managed to rally towards the end of the week.

(Gold: three months)

The US dollar index (DXY – a measure of the strength of the dollar against a basket of the currencies of its major trading partners) shot up, perhaps in a reaction to the US Federal Reserve taking on a more hawkish tone on monetary stimulus, which also helped to push bond yields higher.

(DXY: three months)

The Chinese yuan (or renminbi) continued to tread water (when the red line is rising, the dollar is strengthening while the yuan is weakening).

(Chinese yuan to the US dollar: since 25 Jun 2019)

The yield on the ten-year US government bond burst higher as the spectre of inflation (and higher interest rates) raises its head again.

(Ten-year US Treasury yield: three months)

The yield on the Japanese ten-year bond saw a similar jump, tailing off towards the end of the week.

(Ten-year Japanese government bond yield: three months)

And even the yield on the ten-year German Bund joined in, though it’s still in negative territory, if only just.

(Ten-year Bund yield: three months)

Copper dropped.

(Copper: nine months)

The closely-related Aussie dollar slid against the US dollar.

(Aussie dollar vs US dollar exchange rate: three months)

Bitcoin defied China’s total ban on cryptocurrency transactions to register a near-7% rise on the week.

(Bitcoin: three months)

US weekly initial jobless claims rose by 11,000 to 362,000. The four-week moving average rose by 4,250 to 340,000.

(US initial jobless claims, four-week moving average: since Jan 2020)

The oil price briefly hit over $80 a barrel – its highest in three years – as energy prices continued to dominate the headlines.

(Brent crude oil: three months)

Amazon saw its share price slide as wider markets fell.

(Amazon: three months)

Tesla, however, had another remarkably good week.

(Tesla: three months)

Have a great weekend.

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Ben studied modern languages at London University's Queen Mary College. After dabbling unhappily in local government finance for a while, he went to work for The Scotsman newspaper in Edinburgh. The launch of the paper's website, scotsman.com, in the early years of the dotcom craze, saw Ben move online to manage the Business and Motors channels before becoming deputy editor with responsibility for all aspects of online production for The Scotsman, Scotland on Sunday and the Edinburgh Evening News websites, along with the papers' Edinburgh Festivals website.

Ben joined MoneyWeek as website editor in 2008, just as the Great Financial Crisis was brewing. He has written extensively for the website and magazine, with a particular emphasis on alternative finance and fintech, including blockchain and bitcoin. As an early adopter of bitcoin, Ben bought when the price was under $200, but went on to spend it all on foolish fripperies.