Rates as of 0500 GMT

Market Recap

NZD was the bestperforming currency over the last 24 hours but Im stumped to say exactly why, particularly since New Zealand was on  holiday today. Or maybe thats it because theyre on holiday, NZ was the one bond market where yields didnt fall. That seems to be the best explanation as the change in yields explains about half the change in the major currencies.

That of course leads to another question why the big decline in bond yields overnight? Especially in Europe, where yields on 10year Bunds fell 21 bps, the most in over a decade which would also explain why EUR was the worstperforming currency.

Apparently people are increasingly worried about a recession as Fed Chair Powell reiterated that the Feds commitment to fighting inflation is unconditional in his testimony to the Senate banking panel. Nothing really new in his testimony; again, he didnt view a recession as inevitable but acknowledged that rising energy and food prices, which the Fed cant do anything about, will make it more difficult to bring inflation back down to 2 while preserving the labor market.

In addition, yesterdays preliminary purchasing managers indices PMIs were pretty dismal for the Eurozone and the US but surprisingly good for Japan and the UK. US manufacturing fell especially sharply, as did French and hence Eurozone services. Japans services on the other hand improved noticeably while UK services were unchanged. The threat of evertighter monetary…