Timing of course is important and trading Treasurys is notoriously difficult for short-term investors, Holman added.
Forex:
Prospects of swift interest-rate increases lifted the dollar further, with the DXY Dollar Index hitting its highest since May 2020 at 99.9530.
Setbacks for the currency--which is also benefiting from safe-haven flows due to war in Ukraine--are unlikely to last, ING analysts said.
"Any potential correction in the dollar after a long rally should prove short-lived given the strong underlying current generated by Fed tightening expectations." Speeches by Fed officials this week have added to those expectations.
On Friday, attention may focus on Russia-Ukraine peace talks, "which appear to have stalled," ING said.
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Sterling could weaken in coming months if the Bank of England raises interest rates by less than the market expects due to the U.K.'s cost of living crisis, RBC Capital Markets said.
RBC economists' forecasts imply a further swing toward supporting economic activity over controlling inflation as the BOE's policy driver, RBC currency strategist Adam Cole said in a research note.
"They expect no changes in rates after a final hike in May, though with markets priced as they are, a significantly less dovish outlook than this would still be negative for GBP."
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The ruble weakened 2.5% against the dollar, trading at around 80 rubles to $1. Russian stocks declined 0.3%. The country's benchmark MOEX stock index has lost over 5% this week.
Bonds:
Eurozone government bond yields traded mostly lower, but French OATs underperformed as they price in risks of the coming presidential elections. Friday is the last opportunity to reduce French risk ahead of Sunday's elections, Mizuho's rates strategists said.
The ECB's release of the March meeting minutes didn't contain much information that should have surprised the market, but the selloff after the release was perhaps driven by investors being reminded that policy tightening is set to come soon from the ECB, the strategists said.
Investors eventually bought into the dips in Bunds and yields failed to break over 0.70%, Mizuho added.
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Societe Generale's rates strategists said if Marine Le Pen were to become France's next president, the 10-year French OAT-German Bund yield spread should widen to 90 basis points, ultimately settling in the 60-90 bps range.
French election stress is brewing and a recent revival in the polls give Le Pen a better chance in the second-round contest, the strategists said, with recent election polls show incumbent Emmanuel Macron's lead narrowing over Le Pen.
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An early tapering of quantitative easing in June by the ECB wouldn't push the 10-year Italian-Spanish government bond yield spread meaningfully higher in fair value terms, Morgan Stanley's rates strategists said.
The difference in QE buying by the ECB is negligible, reducing total BTP buying for this year by around EUR7 billion, they said.
Regarding the 10-year BTP-Bund spread, the strategists forecast it will reach 185 bps by year-end, versus 163 bps currently. However, they see a risk the spread will test this level as early as June, given a more hawkish ECB coupled with a spike in BTP issuance by June, both in gross and net terms versus peers.
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Corporate bond creditors look reluctant to price in risks stemming from Russia's invasion of Ukraine, UniCredit's research team said.
"The recent credit performance, which has seen seniors financials and non-financials as well as high-yield credit spreads tightening but hybrids widening moderately this week, suggests that investors remain reluctant to price in the risk of a deterioration in issuer credit quality on the back of the Russia-Ukraine crisis," analysts at the bank said.
They note that no investment-grade company in the iBoxx index has been downgraded to high-yield so far this year.
Commodities:
Crude futures were slightly higher in Europe but set for weekly losses as IEA stock releases offset Russian supply worries.
Oil releases, including those from the Strategic Petroleum Reserve, are expected to total 240 million barrels. Analysts expect the unprecedented amount will depress prices in the short term but will support them at a later point when IEA members are forced to buy back oil to refill their stockpiles.
"The sentiment-driven sell-off [in oil] will give way, and fundamentals will reassert themselves, especially as more market participants start fretting about how will the U.S. administration replenish the SPR drawdown," SPI Asset Management said.
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European gas prices will hover around their current, elevated levels, said Goldman Sachs, meaning no let-up for consumers facing soaring energy inflation.
The bank is forecasting benchmark European gas contracts will stay around EUR104 a megawatt-hour over the summer, despite the warmer period typically seeing waning demand for gas and lower prices.
That is because high prices will be required to attract seaborne deliveries of LNG to Europe, one of the few alternatives to Russian supplies.
"We believe current prices are required to incentivize enough demand destruction and attract LNG imports to help manage European storage ahead of the next winter," the bank said. Prices were last up 3.3% at EUR107.80 a megawatt-hour.
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While EU pledges to wean the bloc off Russian gas have come with a long timetable, Russia is unlikely to find new buyers in time to make up for the lost demand, JPMorgan said.
Europe imported around 186 billion cubic meters of Russian gas last year, of which 101 bcm goes to EU states which plan to phase out Russian imports. As most of it flows through pipelines, Russia would be unable to easily redirect such an amount.
A lack of significant pipeline connections with China means Russia's closest partner would also not be a possible destination and Russian producers would have to shut in some wells to make up for losing around 100 bcm of demand, JPM said.
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Gold prices inched lower as investors considered the effects of the Fed's monetary-policy strategy against rising rates of inflation and supply pressures from Russia's invasion of Ukraine.
Aluminum ticked up despite demand fears in China and the rest of the world over uptake. Prices for the base metal remain very high--up 21% this year--with some analysts speculating whether China could increase production to help ease costs.
Elsewhere, iron ore futures edged down with demand still weak in Asia.
EMEA HEADLINES
Rocket Attack Kills More Than 30 at Railway Station in Eastern Ukraine
A rocket attack on a train station in the eastern Ukrainian city of Kramatorsk killed more than 30 and injured more than 100 people trying to flee the eastern Donbas region, Ukraine's state railway company said Friday, as Moscow focuses its attention on a renewed offensive there.
The station was being used by thousands of civilians trying to evacuate, authorities said.
Russian Tech Spending Declines as Sanctions Take Toll
Information-technology spending in Russia is expected to drop 39% this year as global business sanctions triggered by the invasion of Ukraine take their toll.
On Thursday, the U.S. Senate voted 100-0 to strip Russia of favored trade status and back President Biden's Russian oil ban. The growing list of sanctions imposed by the U.S., the EU and other countries limits Russian access to a broad range of goods and services, including financial systems and certain kinds of technology. Tech giants including Microsoft Corp., Amazon.com Inc.'s Amazon Web Services and Alphabet Inc.'s Google Cloud have said they are suspending new sales or the acceptance of new customers in Russia.
Russia's Central Bank Cuts Key Interest Rate to 17%
Russia's central bank cut its key interest rate following an unscheduled meeting of policy makers Friday, but borrowing costs remained well above their level before President Vladimir Putin ordered the invasion of Ukraine.
In a statement announcing the reduction in the key rate to 17% from 20%, the Bank of Russia said the ruble's rebound from sharp losses in the days immediately following the Feb. 24 invasion had reduced the risk that inflation would move sharply higher.
Volvo Books $422.5 Mln Provision on Halt to Russia Operations
Swedish truck maker Volvo AB said Friday it has booked a 4 billion Swedish kronor ($422.5 million) provision in the first quarter of 2022 due to the suspension of all sales, service and production in Russia.
Volvo has a heavy-duty truck production plant in Russia and employs around 700 staff. The company's total assets in the country are valued at around SEK9 billion, it said.
Rio Tinto Takes Full Control of Alumina Refinery Part-Owned by Russia's Rusal
Rio Tinto PLC said it has taken full control of Queensland Alumina Ltd., one of Australia's largest alumina refineries, in which Russia's United Co. Rusal has a 20% stake.
The action follows sanctions from the Australian government aimed at gumming up Russia's mammoth aluminum industry. Australia has prohibited the export of alumina, used to make aluminum, to, or for the benefit of, Russia. It has also sanctioned oligarch Oleg Deripaska, who owns a large stake in Rusal's majority shareholder.
Credit Agricole Takes 9.2% Stake in Banco BPM
Credit Agricole SA said late Thursday that it has bought a 9.18% stake in Italy's Banco BPM SpA, building on an existing partnership between the two banks.
The French lender said it would aim to expand strategic partnerships with Banco BPM after the stake acquisition, the financial details of which it didn't disclose. The two already collaborate on a consumer-finance joint venture called Agos.
Ukraine Calls for More Arms, Girds for Heavier Fighting Against Russia in East
Ukrainian officials called for more weapons to fight Russia as both sides mobilize forces in the east for what are expected to be some of the fiercest battles of the war so far.
(MORE TO FOLLOW) Dow Jones Newswires
04-08-22 0619ET
