Financial markets experienced a reversal in the US, EMU, and UK bond markets, retracting most of Friday’s gains. Economic data releases were limited and had minimal impact on trading. Various Fed speakers expressed differing views on monetary policy, with some supporting rate cuts and others advocating for patience. Despite this, US yields increased, with a solid performance in the 2-year US Note auction. German yields also rebounded, although markets anticipate a rate cut in June.

Equity markets showed mixed results, with oil prices remaining firm. However, the dollar lost ground, and EUR/USD rebounded. Asian equities displayed no clear trend as investors cautiously approached the quarter’s end. The PBOC strengthened the yuan, impacting both on-shore and off-shore currency trading.

Later today, several US economic indicators will be released, including the Philly Fed Non-Manufacturing Survey, durable goods orders, house price data, and consumer confidence. While durable goods orders are expected to ease, higher house prices may keep housing-related inflation in focus. Consumer confidence is forecasted to stabilize, but these releases are not likely to significantly impact market sentiment.

Bond market sentiment remains uncertain following last week’s mixed guidance from the Fed. The recent rebound suggests limited room for further positioning in anticipation of an early or aggressive Fed easing cycle. Additionally, the Hungarian central bank’s policy decision is awaited, with expectations of a reduction in the pace of interest rate cuts.

In other news, the US faces warnings regarding its ballooning federal debt, with comparisons made to a market shock experienced by the UK in 2022. French deficit figures for 2023 exceeded government expectations, posing challenges for President Macron’s fiscal agenda.

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