A renewed global bond sell-off pushed the 30-year US Treasury yield to its highest level since 2002 on Wednesday, dragging S&P 500 and Nasdaq 100 futures lower after both touched record highs earlier in the week. French and Italian yields jumped as investors weighed debt concerns, high oil prices, and the uncertain end to the Iran war.
Treasury yields hit their highest since 2002
The 30-year US Treasury yield climbed as much as 0.08 percentage points to 5.72% on Wednesday, its highest since 2002, as fears over inflation and high public debt burdens rattled investors. The move hit equity futures directly: futures tracking the S&P 500 and Nasdaq 100 dropped 0.3% and 0.6% respectively, after touching record highs this week.
European bonds moved in tandem. French and Italian yields rose 0.16 percentage points, putting them on track for one of their steepest daily moves this year, while France's 10-year borrowing costs hit 4.91%. According to Citi's Akshay Singal: "France might be the first but it won't be the last."
IMF presses France to rein in its deficit
The pressure on French debt drew a direct warning from the International Monetary Fund. IMF Managing Director Kristalina Georgieva said Wednesday there is a clear recognition in France that the deficit needs to come under 5%, after the country's deficit reached 5.1% of GDP last year. She added that bond markets respond to fundamentals, and that inflation, interest rates, and government debt have all risen.
US mortgage rates track the Treasury move
The Treasury sell-off is also reaching US households. The average 30-year fixed-rate mortgage surged 19 basis points to 7.49% in the week ended October 2, the Mortgage Bankers Association said, the highest level since November 2023. Mortgage loan applications fell 4.2% last week from the previous week as refinancing activity dropped sharply.
Brent crude, the international oil benchmark, was up 1.4% at $102 a barrel, adding to the pressure on yields. The euro fell another 0.6% against the dollar as investors continued to weigh France's political and fiscal strains.
Sources: Financial Times, CNBC, Investing.com
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