Global Bonds Fall On Threat Of Further Rate Hikes: Markets Wrap

A selloff in government bonds accelerated Monday as the threat of further interest rate hikes unsettled traders.

The yield on 30-year German bonds rose as much as nine basis points to 2.72%, the highest since early 2014. Similar-maturity Treasury yields jumped six basis points. US equity futures rose modestly, signaling a rebound from Friday’s retreat.

Investors were focusing on data that shows US economic strength and comments from Federal Reserve Governor Michelle Bowman over the weekend that the rates may need to rise further to bring down inflation.

A closely watched measure of US inflation due this week could stoke more volatility. The consumer price index reading on Thursday is projected to rise 0.2% in July for a second month after excluding food and energy costs, marking the smallest back-to-back gains in 2 1/2 years.

“The door for further rate hikes from the Fed is still open,” said Pooja Kumra, senior European rates strategist at the Toronto Dominion Bank.

Trading in stocks was more subdued. S&P 500 futures ticked higher, while European stocks retreated as an index of German industrial output fell to a six-month low, underscoring weakness in the economy. Volumes in Europe were also relatively light, with trading of Euro Stoxx 50 stocks about 40% less than the 30-day average.

“Inflation is heading in the right direction but there’s certainly too much enthusiasm on that,” said Janet Mui, head of market analysis at RBC Brewin Dolphin. “If core CPI is higher-than-expected and headline CPI reaccelerates more-than-expected, that is something markets are not positioned for.”

Key events this week:

• Atlanta Fed President Raphael Bostic and Fed Governor Michelle Bowman at Fed Listens event, Monday
• Japan household spending, Tuesday
• US wholesale inventories, trade, Tuesday
• Philadelphia Fed President Patrick Harker speaks, Tuesday
• China CPI, PPI, Wednesday
• India rate decision, Thursday
• US initial jobless claims, CPI, Thursday
• Atlanta Fed President Raphael Bostic pre-recorded remarks for employment webinar, Thursday
• UK industrial production, GDP, Friday
• US University of Michigan consumer sentiment, PPI, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.3% as of 7:55 a.m. New York time
• Nasdaq 100 futures rose 0.4%
• Futures on the Dow Jones Industrial Average rose 0.2%
• The Stoxx Europe 600 fell 0.1%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.2% to $1.0980
• The British pound was little changed at $1.2740
• The Japanese yen fell 0.3% to 142.24 per dollar

Cryptocurrencies

• Bitcoin fell 0.2% to $29,038.89
• Ether was little changed at $1,830.93

Bonds

• The yield on 10-year Treasuries advanced six basis points to 4.10%
• Germany’s 10-year yield advanced five basis points to 2.61%
• Britain’s 10-year yield advanced seven basis points to 4.45%

Commodities

• West Texas Intermediate crude fell 0.9% to $82.07 a barrel
• Gold futures fell 0.3% to $1,971 an ounce

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