Yields on 10-year US Treasury bonds hit a nearly 16-year high on Tuesday, in a fixed-income market slide fueled by fears the Federal Reserve will keep interest rates higher for longer.
Treasury yields hit their highest since 2007driven by fears that the Federal Reserve will keep interest rates higher for longer, likely on top of the growing government fiscal deficit.
Increased debt issuance, Fitch’s downgrade three weeks ago and the likelihood of China selling bonds to support the yuan are contributing to the sell-off, while Investors look forward to the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, this week.
“With the Fed in gear, not necessarily to raise rates in September, but to keep them higher, buyers haven’t been as willing to jump in and take advantage of these yield levels,” said Kim Rupert of Action Economics in San Francisco.
S&P Global followed in Moody’s footsteps, cutting the credit ratings and outlooks of several regional US banks on Monday.saying that rising financing costs and problems in the commercial real estate sector are likely to test the strength of banks.
The yield on benchmark 10-year bonds fell 1 basis point to 4.332%, after touching 4.366%, a maximum recorded for the last time in November 2007. The yield on two-year notes, which usually reflects rate expectations , gained 3.9 basis points, at 5.031%.
The decline in fixed income partly reflects a series of surprisingly upbeat US economic news that led markets to reduce expectations of easing monetary policy next year.
Futures now imply 94 basis points of rate cuts in 2024, up from 130 basis points a couple of weeks ago.
Washington also needs increasing borrowing to finance its $1.6 trillion budget deficit, with lenders demanding higher yields above inflation.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
