Global bonds continued to tumble this week as a string of policymakers told investors to expect further rate hikes, pushing back on speculation that central banks were nearing an end to their tightening cycles.[0] The 10-year US Treasury yields have scaled up 3.51%, with the market pricing in a peak policy Fed rate around the central bank’s target of 5.125% for this year.[0] Treasury 10-year yields climbed to around 3.75%, with traders ramping up their bets on future tightening.[1] Bets on the maximum level of the European Central Bank’s rate increased to 3.50%, indicating that there might be an additional 50 basis points increase beyond what is already taken into account.[0] Officials including ECB Governing Council member Robert Holzmann have been busy walking back initial dovish messaging. The increase in yields had a negative effect on the technology sector, with the Nasdaq 100 not performing as well as other indices.[2] With the market pricing in a peak policy Fed rate around the central bank’s target of 5.125% for this year, further weakness in front-end Treasury yields likely finds buyers.[0] It is now looking much less likely that the Fed will cut rates this year, however traders are still pricing over 30 basis points of rate cuts by year-end.[0]
0. “Bonds Tumble as Central Bankers Hammer Home Hawkish Message” Yahoo! Voices, 6 Feb. 2023, https://www.yahoo.com/now/bonds-tumble-central-bankers-hammer-220934200.html
1. “EUR/USD retreats from 1.0800 as Fed pause bets fade post mammoth US NFP report” FXStreet, 5 Feb. 2023, https://www.fxstreet.com/news/eur-usd-retreats-from-10800-as-fed-pause-bets-fade-post-mammoth-us-nfp-report-202302052210
2. “Wall Street Sees Worst Week of 2023 on Fed Jitters: Markets Wrap” Yahoo! Voices, 10 Feb. 2023, https://www.yahoo.com/now/asia-stocks-face-pressure-rates-233833830.html