Wall Street stocks closed at their lowest levels since December 2020, while US Treasury yields edged higher after UK gold-plated market volatility and lackluster sales of new bonds eased. shake investor sentiment.
The S&P 500 blue-chip stock index ended the day down 1%, after losing 4.7% from the previous week. The tech-heavy Nasdaq Composite fell 0.6% on Monday.
The stock market wobbled on Monday as the yield on the 10-year US Treasury note, a benchmark for global borrowing costs, added 0.22 percentage points to 3.92% – its highest level since since 2010. Bond yields increase as prices fall.
The selling in the US followed a brutal session in London, in which gold-plated yields surged for a second straight trading day after the UK government’s massive tax cut plan spooked investors. be afraid. According to Refinitiv data, UK 10-year gilt production rose on Monday, the highest in 40 years.
The sale of two-year U.S. Treasuries on Monday also underscored how fund managers are demanding higher borrowing costs to buy debt as they anticipate big interest rate hikes from the Federal Reserve. state.
According to Thomas Simons, money market economist at Jefferies, the difference in yields between what investors predicted before the auction and the actual outcome is the highest since the market auction in 2020. Simons said the debt was also issued with the highest yield of any two-year auction since 2007 at 4.29%.
“On the one hand, profits seem to present compelling value. . . but this crazy volatility is hard to accept,” he added.
Last week, the Fed led accusations of a series of rate hikes by its peers across the globe, making its third straight hike of 0.75 percentage points to its 3 to 3 target range, 25 percent.
The dollar, which tends to strengthen in times of economic and market stress, gained 0.8% against a basket of six currencies, hitting a 20-year high.
The European corporate bond market also reflects concerns about the effects of rapidly rising interest rates. According to the ICE BofA Euro High Yield index, borrowing costs for high-yield European issuers hit their highest level since the start of the coronavirus pandemic in March 2020 at 7.5%.
Oil prices also fell on Monday, with international benchmark Brent falling 2.7% to $83.80, the lowest since January.
The region-wide Stoxx Europe 600 share index fluctuated between positive and negative territory for the day before ending down 0.4%. The regional index closed Friday’s session in “bear market” territory – generally defined as a drop of 20% or more from recent peaks. FTSE 100 flat finish.