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  Latest
The Heart of Discipline July 6, 2022
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Monitoring 10-Year Bond Spreads And Stock Market Performance

Mira Team by Mira Team
August 7, 2020
in Article
Reading Time: 2 mins read
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10-YEAR BOND YIELD SPREADS

Monitoring 10-year bond spreads can give you a good idea of where investment flows may be headed in the future. Here’s the thing, though: you can’t just look for the country that has the highest yield and anticipate that the currency from that country is going to continue to move higher and higher. What you want to be looking for is a country whose bond yields are increas­ing. It is this change in bond yields that can lead to a change in investment flows, which can lead to an increase in the value of the currency.

For instance, if you are watching bond yields in Switzerland, and you notice that they are starting to move steadily higher, this is a great clue that the value of the Swiss franc may be appreciating. Now, if, at the same time, you notice that the bond yields in the United States are starting to decline, you should seriously consider looking at placing a trade that takes advantage of both a strength­ening Swiss franc and a weakening U.S. dollar.

The Financial Times is an excellent resource for tracking these bond rates.

STOCK MARKET PERFORMANCE

Monitoring stock market performance can also give you a good idea of where investment flows may be headed in the future. Here’s the thing, though: just as with bond yield spreads, you can’t just look for the country that has the strongest stock market and anticipate that the currency from that country is going to continue to move higher and higher. What you want to be looking for is a country whose stock market is getting stronger and stronger. It is this change in the strength of the stock market that can lead to a change in investment flows, which can lead to an increase in the value of the currency.

For instance, if you are watching the stock market perform­ance in Japan, and you notice that the market is starting to move steadily higher, this is a great clue that the value of the Japanese yen may be appreciating. Now, if, at the same time, you notice

that the stock market in the United Kingdom is starting to decline, you should seriously consider looking at placing a trade that takes advantage of both a strengthening Japanese yen and a weakening British pound.

The Financial Times is an excellent resource for tracking the performance of various stock markets.

Tags: Fundamentals
ⓘ Some contents provide links to third-party news and current events as a convenience to you. We have not reviewed and don't endorse the contents of these sites. Please always do your own research. Mira FX does not endorse any companies, products or services which are represented on this article. Mira FX is not liable for any damage or loss, including but not limited to, any loss of investment, which may be based either directly orindirectly on the use of or reliance on such information. Before deciding whether or not to take part in foreign exchange or financial markets or any other type of financial instrument, please carefully consider your investment objectives, level of experience and risk appetite.

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