Bonds Bonds Bonds

When bonds offer higher yields than US tech, where do you hide and invest? What’s next for markets

Equities 7 minutes to read
APAC Strategy Team

Summary:  With US, Australian and Asia markets bearish and in downtrends as US 10-year bond yields offer 2.97% vs the Nasdaq's 0.9% yield, investors continue to be rewarded for US dollar and USD ETFs exposure which is likely to see upside ahead of earnings and economic growth slowing. Why to NOT be lured in by shiny one-day gains in downbeat stocks in long-term downtrends. Commodity high performers and commodity stocks selloff on profit taking. But here is why to consider investing in copper, aluminium and even Chinese infrastructure stocks.

What’s happening in markets that you need to know?

US markets turn very bearish as US bonds offer higher yields (2.97%),  outpacing the S&P500 & Nasdaq’s yields of 2.6 and 0.9%. The technical indicators suggest further selling is ahead on all weekly and monthly chart, but be mindful of volatility with CPI data out Wednesday. The risk off mood continued in the US overnight; the Nasdaq fell 4.3% and S&P500 lost 3.2%, and now the futures are negative suggesting further selling. We are continuing to see professional investors short the market, and reduce positions stocks that have had a good run (energy names like Marathon Oil, Devon Energy fell 14% & 11% overnight), while buying into defensive (staples names) picked up, with Campbell Soup shares rising 3.5%, Kellogg’s up 2.5% overnight. In the Dow Jones; Walmart shares rose 1.2% and its trades up 4.6% YTD. While other rallies in stocks (in Dow Jones 30), were probably caused by traders closing shorts; for example 3M shares rose 1.69% (but it trades 14% lower YTD), Home Depot rose 1% overnight after falling 27% YTD. A sign of dip buying? Not likely. More likely traders are closing shorts.

In Australia, the share market recovered from a 2.5% fall earlier and now trades down 1.4% on Tuesday. It's vital to note, what has caused the Aussie share market to lose 7.6% in the last three weeks is that the 10-year Australian bond yield climbed to 3.5% (a 8-year high), meaning a safe-haven bond asset almost offers a better yield than the ASX200’s average yield 4.6%. Where to next? The market is pricing in slower growth and company earnings. So both the US and ASX, as mentioned yesterday , are in technical downtrends. For a full technical update on ASX200 click here. However, as always, remember, when better than expected news is released, stocks typically rally. What happened today that helped claw back heavy selling was that better than expected company results came out; fund manager Pendal (PDL) shares 6.2% after its profit jumped 59% in the half year, beating expectations. Pendal is the second investment manager this week in Australia that reported profits rose over 50%, with Macquarie’s profits up 56% in their full year. In economic news in Australia today, business confidence data released today shows confidence levels dropped from a 5-month high, in April, but remained above the long-run average. What’s interesting is sales and profit levels measured rose, but cost pressures continued to climb after hitting record growth rates in March. So it’s only a matter of time, before profit and sales start to fall in the data, as it has done in overall company earnings in the ASX200.

AUDUSD is in a bearish downtrend after falling for the third straight day, and is now buying 69.53 US cents – which is its lowest level since July 2020. 

Tech and energy rout extends to Asia. The sour mood from the Wall Street is set to extend to Asia’s Tuesday session. Double whammy of higher US yields and a stronger USD weighing looks set to extend. Asian tech stocks remain on the backfoot, with Fed rate hikes just getting started. Recession concerns capping gains in energy as well. Nikkei (NI225.I) dropped below 26000 as it fell close to 2% in the morning. Earnings on watch from Japan Steel (XX), Nintendo and Itochu. Singapore’s STI Index (ES3) down 1.3% with China lockdown concerns continuing to add fuel to the Fed fire.

Hong Kong equity markets gapped down on overseas market weakness and China slowdown fear. Hang Seng Index (HSI.I) slid 3% and Hang Seng TECH Index (HSTECH.I) dropped 5%.  Chinese mega-cap internet names fell 3% to 10%.  Energy and materials stocks slid as well as, following declines in crude oil and industrial metal prices amid intensifying fear of a sharper downturn in the Chinese economy. 

Commodities joining the market selloff. The Bloomberg commodity spot index slumped over 4% on Monday, the worst selloff in two months. China’s lockdowns as well as higher yields and gains in the USD are weighing on commodities. Concerns about weaker demand are now outweighing tight supply situations, especially in the metals space. Natural gas prices plunged over 12% while crude oil slid as well with European Union softening its proposed sanctions on Russian crude exports. Poor weather conditions along with spike in fertilizer prices are weighing on crop outputs after supplies were rocked by the Ukraine invasion.

What to consider?

EM selloff on the cards? Dollar dominance and higher US yields mean emerging currencies may be poised for a selloff as well. The Indian rupee (INR) slid to record lows of 77.53/USD on Monday despite the Reserve Bank of India raising rates last week ahead of the Fed. The RBI has huge forex reserves of $600bn, and this may be used to defend the rupee. But EM currencies broadly remain at risk of selloff given the lower room to hike rates in step with the Fed which means capital outflows.

China’s export growth (in USD terms) decelerated to 3.9% YoY in April.  Being slightly better than market expectation, it confirms a deteriorating trend in China’s exports.   Imports was flat in April. 

The PBoC released its Q1, 2022 monetary policy report, which highlights the importance of monitoring the risk of imported price increases. The report reiterates that the central bank will not flood the market with excessive liquidity but aim at supporting industries and the real economy structurally. In other words, it will continue to use more industry and sector specific relending programs and use administrative measures to guide banks to increase lending to industries in need.  This, together with its emphasis on imported price inflation, reduces further the odd of aggressive policy rate or reserve requirement ratio cuts. While the PBoC, in our opinion, will welcome an orderly depreciation of the renminbi to mitigate its relative appreciation against the Japanese Yen, Korean Won and currencies of other trading partners other than the U.S., the report’s emphasis on the risk of rising prices of food and energy imports, which are price in dollar, signals that the PBoC is mindful to keep the pace of the depreciation not getting excessively fast and far.  

Several Chinese regulators jointly issued guidelines for the live broadcasting show industry.  The guidelines forbit online live broadcasting platforms from showing league table of top tippers and accepting tipping from minors.  The guidelines are considered moderate as they neither cap the amount of tipping per viewer nor the total amount of tipping received per performer as some have feared.

Don’t be fooled by short term rallies, if a stock or index is down considerably, as professional investors are closing shorts. As mentioned above, stocks that are down considerably, are seeing big gains, possibly as people are closing short positions. This is typical in a bear market or a market in correction territory. On the ASX today for example the best performing stock today, is Polynovo (PNV), trading 17% up on Tuesday. Some might think that signals the bottom for the stock and buy in...without look under the company’s hood. But until you do that, you might not realize what’s a play. It's not as shiny as you think. Biotech, tech stocks, and other growth names, that don’t have rising cash flow and earnings growth are being penalized in these markets with central banks rising intertest rates by the most in over a decade. Polynovo’s business of helping burns victims is valid, but its cash flow has been falling. That's one of the reasons PNV’s shares are down 73% from 2020. Macquarie also thinks its stock is overvalued, but has it as a BUY. So keep that mind, be mindful off big jumps in shares, that are being squeezed in this market.

Potential trading ides?

Volatility is ahead, consider a position in the US dollar or in a US dollar ETF. Tesla shares are down 36% since November 5, after the Fed flagged it would hike rates. Over that same time, a typical US dollar ETF, like the Invesco USD Index Bullish Fund ETF has gained 10%. And the BetaShares USD ETF has gained 7%. As mentioned yesterday, also as our head of FX Strategy also said, we are bullish on the USD high spiking volatility, and bond yields. So this supports the USD and USD ETFs.

Fortunes can be made on days like these. While the grim mood in the markets has left little room for any upsides, it beckons the sentiment that everything is on a steep discount. While profit taking opportunities may be limited, markets present shorting opportunities for short-term traders and dip-buying opportunities for investors. Look for valuation support companies, which are trading at lower multiples relative to earnings. Also, companies with greater pricing power and those focusing on productivity and innovation. 

Copper/Aluminum waiting for China stimulus. Copper and aluminum prices have been dragged lower by the Chinese authorities remaining committed to zero covid policies, and following the dismal export numbers from China reported yesterday. While near-term pressures are set to stay, China’s infrastructure boost will possibly be a tipping point in these industrial metals.

Investing in Chinese infrastructure construction.  Given the property sector is still in dire shape and a decelerating export sector, plus the limited room of maneuver in monetary policy, the heavy lifting work to boost the economy is left to infrastructure construction.  Some of the stocks in the both traditional infrastructure in transportation, energy and water conservancy and the new infrastructure areas in 5G, data centers, ultra high voltage, EV charging piles, AI, industrial internet of things and inter-city rail and urban transit network may look interesting in the coming months. 

Seeking tips on how to become a 7-figure investor? Our Australian Market Strategist Jessica Amir, caught up with Saxo Markets Australia CEO, Adam Smith to get his insights, perspective and tips. Click the link to find out more.

Key economic releases this week:

  • Tuesday: Japan household spending, US NFIB small business optimism index. Australian business confidence.
  • Wednesday: China April PPI/CPI, Malaysia BNM interest rate announcement, US April CPI, Australian Consumer Confidence.
  • Thursday: India April CPI, US April PPI
  • Friday: US Univ of Michigan sentiment, US import price index

Key earnings release this week:

  • Tuesday: Suncor Energy, Bayer, Munich Reinsurance, Sony, Nintendo, Mitsubishi, Endesa, Alcon, Occidental Petroleum, Electronic Arts, Coinbase Global, Trade Desk, Unity Software, Roblox. In Australia; Penda;
  • Wednesday: Genmab, E.ON, Siemens Energy, Continental, Toyota, SoftBank, Takeda Pharmaceuticals, Delhaize, Mowi, Swedish Match, Walt Disney, Coupang. In Australia; GrainCorp, CSR
  • Thursday: Verbund, KBC Group, Brookfield, Fortum, Siemens, Allianz, Merck, Hapag-Lloyd, RWE, Atlantia, Snam, NTT, SoftBank Group, Aegon, Naturgy Energy, Motorola Solutions. In Australia; Comonwealth Bank, Orica, Xero
  • Friday: Deutsche Telekom, KDDI, Honda Motor, Alibaba. In Australia; Goodman Group



For a global look at markets – tune into our Podcast. 


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (
- Full disclaimer (

Boulevard Plaza, Tower 1, 30th floor, office 3002
Downtown, P.O. Box 33641 Dubai, UAE

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.