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Contact UsAFS Markets Blog: afternoon 04/02/2026
AFS afternoon commentary
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- Meanwhile in markets, the bond market remains stuck in a holding pattern, while equities continue to ride the jolts of the AI boom/bust;
- US Treasury yields are up about a basis point across the curve, while Bund yields are down 1–2bps. Zooming out, Italian and Spanish spreads versus Bunds are hovering just above their tightest levels in a decade. Meanwhile, Bloomie’s index for high-grade euro corporate bond spreads hit its tightest level since the global financial crisis;
- Shifting to equities, the Stoxx 50 is down more than a quarter percent, while S&P 500 futures are steady after clawing back about a third of yesterday’s AI-led selloff. Software names remain under pressure following Anthropic’s latest AI plugin, which promises to automate everything from sales workflows to data analysis. Wires note Goldman’s AI losers basket — firms whose services risk being automated — is now down nearly 10% over the past two sessions;
- In FX, the broad dollar has retraced roughly half of its late-January losses but has been largely range-bound since yesterday. Notably, the Swiss franc – the biggest hit by the dollar’s slide – remains near its highs. EURCHF sits just below 0.92, while USDCHF is about a cent and a half off its lows;
- The franc’s stubborn strength has put the Swiss National Bank in a bind. President Martin Schlegel acknowledged it is not an easy situation for monetary policy with inflation barely above zero and the policy rate already at zero. Even so, SARON swaps are only lightly pricing in easing, with just 6bps of cuts at the deepest point in the curve this year. We expect the SNB to tolerate a few months of deflation rather than move quickly on rates, aiming to avoid a cut deep into negative territory if deflation looks temporary;
- Moving on to the Japanese yen, where the relief provided by the dollar’s slide proved short-lived. It wasn’t a surprise seeing Reuters is now running a yen crisis tracker on its front page. USDJPY is trading above 156.50, closer to its 2026 high than its low. Still, 10- and 30-year JGB yields remain range-bound after January’s long-end spike. That may just be the calm before the storm, but that hinges on Prime Minister Takaichi’s next move;
- At the Japanese general elections on Sunday, polls suggest Takaichi’s LDP party is on track to secure a majority. That would give her the mandate to push fiscal loosening further. But last month’s JGB tantrum was a clear shot across the bow, further spending risks ballooning a debt load near 230% of GDP, just as it had finally started to inch lower in the past years. The Prime Minister has little room to test investor patience, especially if we take at face value wire reports citing Bank of Japan sources, who say they would intervene in JGB markets only to counter speculative selling, not moves driven by fiscal policy;
- Later this afternoon, we have the release of ISM Services PMI to look forward to. Tomorrow brings the rate decisions of the ECB and BOE, both expected to hold, alongside a little Fed-speak.
