Bond Yields Pause, Dollar Fails to Find Direction Amid Market Volatility

Global bond yields took a breather yesterday after setting multi-year highs earlier in the week. Federal Reserve official Waller commented that he would support keeping interest rates stable in September if August inflation confirms disinflation, but added that a hot reading could lead to a hike. His conditional assessment didn't provide much new news, and US yields eased between 3.3bps and 1bp.

The US services ISM printed strong at 55.1, with high readings for new orders and prices paid, while the employment subseries stayed below 50. The market reaction was negligible, and German yields declined by 4bps to 2.2bps.

Meanwhile, the dollar showed no clear trend, with EUR/USD rebounding to close above 1.16, and USD/JPY closing below 156 after a hawkish comment from BoJ policy maker Takata triggered a yen rebound.