Global bonds under siege as treasuries selloff spreads
BNN Bloomberg
Global bond markets came under pressure Monday after Treasuries sold off on Friday on increased speculation of a March rate hike by the U.S. Federal Reserve.
Global bond markets came under pressure Monday after Treasuries sold off on Friday on increased speculation of a March rate hike by the U.S. Federal Reserve.
Australia’s three-year yield climbed to 1.278 per cent, approaching an Oct. 29 peak of 1.280 per cent that was the highest since May 2019. New Zealand’s 10-year yield advanced as much as seven basis points to 2.57 per cent. Futures of Treasury notes slid after the 10-year yield closed at their highest since January 2020 on Friday.
Yields are rising as investors increasingly fret that elevated U.S. inflation will prompt the Fed to tighten policy faster than anticipated, with markets now pricing in just over one hike in March. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said Friday the central bank could raise rates as many as seven times, while billionaire investor Bill Ackman argued for a bigger-than-expected 50 basis points move in March.
If global central bankers “normalize policy too quickly, they risk setting off a volatility wave which can generate a market re-pricing in highly algorithmic markets,” according to a note from Jamieson Coote Bonds Pty. “Central Bankers may very well kill inflation by these actions, but they also may kill off the economy in the process in a highly interest rate sensitive world.”
Japan’s 10-year yield dipped half a basis point to 0.14 per cent after climbing to as high as 0.155 per cent on Friday. JGB traders are waiting to hear from the Bank of Japan this week following a report of a debate on future policy.
Futures of Treasury 10-year notes dropped 17/32 to 127 21/32. There’s no Treasury cash trading globally on Monday due to Martin Luther King Jr. Day. The spread between two- and 10-year Treasury yields shrank to 81 basis points on Friday, within 10 basis points of the tightest level since December 2020.
