Rising Bond Yields Keep World Stocks Unstable
- Author: Zachary Reyes Feb 09, 2018,
Feb 09, 2018, 14:53
The sharp increase in bond yields in India over the past few weeks has been attributed to investors' concerns about the fiscal slippage in FY18 and a higher-than-expected fiscal deficit target for FY19.
Wild swings over the past week have left stocks in the red for the year.
Treasury yields moved higher on the day. The U.S. Senate reached a bipartisan deal Wednesday that would boost spending limits by $300 billion over the next two years. When bond prices go lower, their yield increases. The since February 2016.
The market's main gauge of volatility, the Chicago Board Options Exchange (CBOE) Volatility Index, fell to 29.82 on Thursday, more than twice what it was a week ago but down off a two-and-a-half year high above 50 points hit on Tuesday.
But as 10-year Treasury yields get closer to those levels, the rationale - given the higher risk involved and lower leverage - starts to evaporate. Jobless claims are released Thursday morning at 8:30 a.m. ET, but there's no major data until CPI and retail sales data next Wednesday.
"I don't think markets can recover immediately (from the shock), there needs to be a stabilization phase". It's been pretty ugly.
Oil prices were down after data showed USA crude output had reached record highs and the North Sea's largest crude pipeline reopened following an outage.
The S&P 500 dividend yield has been at around 2 percent for the past nine years, drawing investors looking for dependable returns.
"If 2.88 scared people why would they be comfortable with 2.84/2.85", said Schumacher. The unemployment rate was at a near 17-year low of 4.1%.
Germany's 10-year yield climbed five basis points to 0.79 percent, the highest in more than two years. That's why everybody is going back and forth.
"There are no mechanical linkages between the Treasury market and the stock market", said Brian Jacobsen, multi-asset strategist at Wells Fargo Asset Management.
London's market felt even more pressure when the BoE stated that interest rates would rise faster than expected, increasing the value of the pound.
World stock markets remained on shaky ground on Thursday as US bond yields crept back toward four-year highs after congressional leaders reached a two-year budget deal to raise government spending by nearly $300 billion.
The Stoxx Europe 600 Index dipped 1 percent. That compares with $420 billion net previous year in notes and bonds.
Stocks in world markets remained on shaky ground on Thursday, with major US stock indexes falling more than 1 percent, as USA bond yields crept back towards four-year highs.
"The cause of this correction is the ostensibly withdrawal of liquidity by central bankers, and consequently rising interest rates. We're going to continue to see volatile days", said JJ Kinahan, chief market strategist at TD Ameritrade. This is what we saw last week after U.S.jobs report showed wage growth accelerated at its quickest pace since mid-2009.
"We have seen the US Fed warning the markets that it would be raising interest rates".
Philadelphia Fed President Patrick Harker speaks at 8 a.m. ET in NY, and both Minneapolis Fed President Neel Kashkari and Kansas City Fed President Esther George have 9 a.m. appearances.