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US Treasuries stabilized in European trading on Friday after the most tumultuous day for the world’s largest bond market since the height of coronavirus-related disruptions last March

Five-year Treasuries, which were at the center of a sharp decline in U.S. national debt on Thursday, saw a higher price on Friday and yield slipped 0.04 percentage points to 076 percent after rising more than 02 percentage points in the previous one Meeting 10-year government bond yields also followed, falling 004 percentage points to 147 percent after jumping 16085 percent on Thursday

“Yesterday was nothing more than a failure on world markets The sell-off in government bonds accelerated as investors looked forward to the prospect of the economy strengthening in the coming months, “said Jim Reid, research strategist at Deutsche Bank
The bond market turmoil rebounded on Wall Street stocks on Thursday, sending the Nasdaq Composite down 35 percent, a trend that negatively impacted trading in Europe and Asia on Friday

The Europe-wide Stoxx 600 lost 04 percent in morning trading, London’s FTSE 100 benchmark shed 03 percent and Germany’s Xetra Dax slipped by 0 1 percent

The nerves of the bond market were visible in the Asia-Pacific equity markets, Japan’s Topix index fell more than 32 percent, while the S&P / ASX 200 of Australian blue-chip stocks fell more than 2 percent on Hong Kong’s slope Seng Index shed 36 percent and the CSI 300 in mainland China fell 2 percent4 percent

Japan was only part of the global euphoria So when [stocks] fall, they fall quickly

Stock volatility came as investor concerns grew that the global economic recovery from the Covid-19 pandemic could create inflationary pressures, causing the US and other central banks to tighten monetary policy

“Given the US economic outlook, boosted by the improvement in the pandemic, vaccine distribution, and the prospect of President [Joe] Biden’s financial package, investors are now at risk of inflation as well economic overheating is fixed, “said Tai Hui Chief Asia Market Strategist at JPMorgan Asset Management

Investors’ focus is on how central banks will react to rising bond yields and concerns about asset price bubbles

The Reserve Bank of Australia announced on Friday that it had an unscheduled $ 3 billion A $ (US $ 2) will earn 4 billion) Purchase of three-year government bonds to defend the return target with this term

Government bond yields have risen sharply in Australia this year, while the local currency is at a three-year high against the dollar as the country’s economic recovery from Covid-19 gained momentum “At some point this could be a problem for those economic recovery and other asset prices will be, “said David Plank, an economist at ANZ

In Australia, the 10-year government bond yield fell 004 percentage points to 1,812 percent, but was up 0.12 percentage points to 1,849 percent during Asian trade, its highest level since April 2019

Concerns about the independence of the central bank are also growing The New Zealand government is instructing rate setters this week to factor brand new house prices into their policy making

Traders in Tokyo speculated that world market ruin could cause the BOJ to enter the bond and equity markets to keep the 10-year JGB’s returns from rising above 0.2 percent and in support of the Topix

The sale at the beginning of the Tokyo session had brought yields on Japan’s 10-year benchmark government bond to 0.178 percent – the highest level since the Bank of Japan announced it would adopt a negative interest rate policy in early 2016, and the yield later stabilized at 0.167 percent

Investors have come to believe that the BoJ will prevent 10-year JGBs from moving outside of about 20 basis points on either side of zero, analysts

said

Takeo Kamai, head of execution services at brokerage CLSA in Tokyo, said the decline in the Topix means it is almost certain that the BOJ will be for the first time since Jan. I’m going to make a big purchase of exchange-traded funds on January

“They will, but it won’t make much of a difference. Really, people are just tracking what the long and short-term US Treasuries are doing,” Kamai said, adding that the recent surge in Japanese stocks is making the difference Nikkei 225 index brought to 30-year highs, had never been driven by a strong domestic catalyst

“Japan was only part of the global euphoria So when [stocks] fall, they fall quickly, “he said

Bonds

World News – AU – US Treasuries stable after strong sell-off since the turmoil in March

Source: https://www.ft.com/content/1f25370e-f878-4c6f-9ae7-aa4f1814f29b