A sell-off in treasuries erupted on Tuesday as investors bet on monetary tightening from the Federal Reserve, with markets pricing in the first of four rate hikes from the central bank. US central bank this year.
Treasury yields rose to two-year highs as traders returned from a long weekend in the US, dragging stock markets lower and exacerbating a downturn in tech stocks. .
Yields on 10-year US Treasuries, which rose as global government debt benchmark prices fell, rose 0.05 percentage points to 1.82% on the prospect of higher deposit rates and drag on inflation. Longer term makes fixed-rate securities less attractive.
Meanwhile, yields on the two-year Treasury note, which closely tracks interest rate expectations, rose 0.06 percentage points to 1.02 percent – levels not seen since February 2020.
“There is speculation that the Fed is increasing its aggressiveness,” said James Athey, a portfolio manager at Aberdeen Standard Investments.
The mood, he said, was “booted” by JPMorgan chief executive Jamie Dimon “incidentally suggesting last week that [policymakers] can go for a long walk six or seven times this year, and the move has gathered momentum.”
The US central bank has forced its main funds rate to be near zero since March 2020, but interest rate futures show traders expect it to exceed 1% by December.
The Bank of Japan, on Tuesday lifted its inflation forecast, added further impetus to the rise in yields, analysts said. The BoJ, often the most dovish of the world’s major central banks, said the risk around its forecast was now “in balance” rather than “tilted to the downside”. ”, a phrase it has used since 2014.
“The shift in language” allows markets to envision a world where the BoJ steps out of the easing accelerator, said Padhraic Garvey, analyst at ING.
Futures contracts bet on the direction of Wall Street’s Nasdaq 100, which is stacked by other highly regarded tech and growth companies, sensitive to expectations of tighter monetary policy. , fell 1.6%. Followers of the broader S&P 500 stock index fell 1%.
Shares of Goldman Sachs fell 3% in pre-market trading, after the US bank reported a 13% drop in fourth-quarter net profit, worse than analysts’ forecasts, due to trading revenue. lower. On Friday, JPMorgan warned that Rising costs will affect its 2022 earnings.
European stocks fell, with the Stoxx 600 falling 1.1%, followed by a 2.2% drop by shares in its technology sub-index. London’s FTSE 100 lost 0.5%.
In a sign that geopolitical tensions are spreading to financial markets, Russia’s main stock exchange lost more than 5% on Tuesday, putting Moex on its worst day since the market crash. action in early 2020. The broader FTSE index of emerging market stocks fell 0.9%.
The German 10-year Bund yield, a benchmark for European household and business borrowing costs, traded at minus 0.02% on Tuesday as it remained close to par. climb in the air for the first time since 2019.
Stock market original rose After last week’s data showed US inflation hit an annualized rate of 7% in December, but is also adjusting on a month-to-month basis.
But new concerns about prolonged price increases due to supply chain bottlenecks have emerged after authorities in China, a major commodity exporter, responded to the spread of coronavirus variant Omicron with new lock and cruise control.
“That is now starting to cause some concern about supply chain collapse,” said Randeep Somel, portfolio manager at M&G. “It could go the other way at a time when many Western economies will pick up speed and open things up again.”
In Asia, Hong Kong’s Hang Seng stock index fell 0.4% and Tokyo’s Nikkei index closed 0.3% lower.
Brent crude, the oil benchmark, rose 0.8% to $87.15 a barrel – reached its highest level since 2014.
The dollar index, which measures the US currency against six other currencies, was up 0.2%.