(Bloomberg) — The selloff in US Treasuries extended into a third straight day, with 30-year yields touching 5% for the first time since 2007 and sending global financial markets into a tailspin.
Most Read from Bloomberg
As conviction grew that US interest rates could rise further from current 22-year highs, 10-year Treasury yields also climbed closer to the key 5% threshold. That pushed the MSCI all-country equity index into a fourth day of declines and to the lowest since May, while European shares dropped. US index futures fell after the underlying S&P 500 index dropped to a four-month low Tuesday.
The latest leg of the selloff has been fueled by Tuesday’s better-than-expected US job data, as well as a slew of hawkish comments from Federal Reserve officials. Markets are pricing a one-in-three chance of a November hike and see a more than 50% likelihood of a move in December.
“The bond selloff was triggered after peak rate hopes vanished into thin air for the moment,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM. “The fear of higher yields in the future has forced investors to sell and — no surprise — the crowd runs toward a small door.”
Ten-year Treasury yields, the benchmark for the global cost of capital, have risen about 30 basis points this week. Bonds globally have followed suit, with Japan’s five-year borrowing costs rising to a decade high and yields on Chinese investment-grade dollar credit touching an 11-month peak. In Europe, German yields rose about 5 basis points to the highest since 2011.
And the impact of the bond rout has rippled across asset classes. US crude futures slipped back below $89 a barrel, and global currencies buckled under the dollar’s renewed strength. As the greenback rose to a new 10-month high against a basket of Group-of-Ten peers, speculation grew of Japanese intervention to stabilize the yen. Taiwan pledged to step in to moderate currency moves if needed, while Indonesian authorities said they were buying bonds to steady the rupiah.
In individual stock moves Wednesday, airline SAS AB fell as much as 96% after the bankrupt Scandinavian flag carrier announced plans to be taken private. Tesco Plc rallied after Britain’s biggest grocer increased its profit forecast.
Key events this week:
China has week-long holiday
Eurozone services and composite PMIs, Wednesday
ECB President Christine Lagarde gives welcome address at conference, Wednesday
US ISM services index, Wednesday
France industrial production, Thursday
BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
US trade, initial jobless claims, Thursday
San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
Germany factory orders, Friday
US unemployment rate, nonfarm payrolls, Friday
Some of the main moves in markets:
The Stoxx Europe 600 fell 0.1% as of 9 a.m. London time
S&P 500 futures fell 0.3%
Nasdaq 100 futures fell 0.5%
Futures on the Dow Jones Industrial Average fell 0.2%
The MSCI Asia Pacific Index fell 1.6%
The MSCI Emerging Markets Index fell 1.2%
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.2% to $1.0484
The Japanese yen rose 0.1% to 148.86 per dollar
The offshore yuan was little changed at 7.3172 per dollar
The British pound was little changed at $1.2084
Bitcoin rose 0.2% to $27,449.5
Ether fell 0.7% to $1,644.78
The yield on 10-year Treasuries advanced three basis points to 4.83%
Germany’s 10-year yield advanced two basis points to 2.99%
Britain’s 10-year yield advanced four basis points to 4.64%
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck, Kevin Kingsbury, Abhishek Vishnoi and Winnie Hsu.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.