08:09 AM EDT, 05/17/2024 (MT Newswires) -- Global bonds rallied in lockstep with US Treasuries (UST), but Japan was the exception, said Societe Generale.

Japanese government bond (JGB) yields rose after the Bank of Japan (BoJ) cut the amount of bond purchases for buy-back operations. The 10-year JGB yield rose to a high of 0.974%, wrote the bank in a note to clients. Purchase operations were left unchanged early Friday.

The long end outperformed in New Zealand, Canada and Australia followed by the eurozone periphery, stated SocGen. Front-end yields also retreated, but 2s/10s spreads narrowed.

In foreign exchange (FX), the Scandinavians (NOK and SEK), New Zealand dollar (NZD) and sterling (GBP) notched a gain of more than 1%, noted the bank. The Canadian dollar (CAD or loonie) lagged with a gain of just 0.3%, pipping the yen (JPY) and Swiss franc (CHF).

EUR/USD accelerated through 1.08 as spreads tightened but stalled at key resistance of 1.0885. The pair is up five weeks on the trot and 2.4% from the April low. The single currency (EUR) is outperforming the US dollar (USD) and CAD so far in May but struggling against the Scandinavians and antipodeans.

In emerging markets (EM), it was all about Chile's peso (CLP), where the combination of lower US yields and rally in copper deflated USD/CLP back below 900 for the first time since early January, pointed out SocGen. Poland's PLN, Czech's CZK and South Africa's ZAR again notched up decent gains, but Mexico's MXN and India's INR struggled to turn lower US yields to their advantage.

Bad data is good for rate cuts, so the S&P rallied to a new closing high above 5,300, added the bank. Investment grade credit indexes rallied in the US and Europe. High yield tightened in Europe but widened fractionally in the US.

A flurry of new corporate issuance and a rally in UST caused US 10-year swap spreads to widen to -36bps, the lowest level since March 26. In contrast, European spreads were little changed at -28bps. Pricing of European Central Bank (ECB) cuts in 2024 gravitated back towards three.