A sell-off in global government bonds eased on Friday as oil prices pulled back from recent highs, easing some of the pressure that had driven borrowing costs to multi-year peaks. The S&P 500 held close to its recent highs even as traders raised bets on another Federal Reserve rate hike, while the dollar advanced against most major currencies.
A sell-off in global government bonds eased on Friday as oil prices pulled back from recent highs, even as traders raised bets on another Federal Reserve rate hike.
Yields retreat as oil cools
European government bonds rallied when markets opened, sending 10-year UK gilt yields down 0.04 percentage points to 5.35%. German Bund yields fell 0.03 points to 3.58%, while 10-year US Treasury yields held flat around 5.17%. It followed a sell-off in Wednesday and Thursday's US sessions that had pushed 30-year Treasury yields to their highest level since June 2004.
Brent crude eased 0.6% to $105.95 a barrel after Tehran offered Washington a seven-day proposal to reopen the Strait of Hormuz. Mizuho strategist Evelyne Gomez-Liechti cautioned the improvement remains tentative rather than a clear change in direction, pointing to comments from Iranian foreign minister Abbas Araghchi that Tehran was "not in a hurry" to reach a deal. Earlier in the week, the surge had already pushed the 10-year Treasury yield to a 19-year peak of 5.23% and lifted the 30-year to its highest level since 2004, pushing US mortgage rates to 7%.
Rate-hike bets climb
Futures now show a 71% probability of another Federal Reserve rate increase next month, up from around 53% earlier this week, as hawkish policymakers signaled further tightening. Norway's Norges Bank also raised rates, while Sweden's Riksbank indicated it could follow suit by year-end.
Higher borrowing costs are weighing on stocks elsewhere in Asia: the CSI 300 fell 1.7% and the Hang Seng dropped 1.2%, as rising yields raise the cost of capital for equities, Bank of America's Winnie Wu said.
S&P 500 holds firm near highs
The S&P 500 has climbed from last week's six-week low of 7,573 to this week's high of 7,782 before retracing, with Thursday's low of 7,663 now underpinning the advance. The late August-to-September highs of 7,756 to 7,782 are expected to be revisited; a break above them would put the August all-time high of 7,816 back in focus. The index stays bullish in the short term while it holds above the 24 September low of 7,663.
Dollar gains, Asia mixed
The dollar has gained about 1% this week to a two-month high near 101.2, pushing the euro down to a two-month low of $1.1370 and sterling near a three-month trough of $1.3220. Brent crude slipped 0.8% to around $105.75 a barrel after jumping 3% overnight on a Houthi missile attack on Saudi Arabia.
Asian equities were mixed in thin, holiday-affected trading, with mainland China, Taiwan and South Korea closed. Japan's Nikkei gained 1% following a broadly flat Wall Street session in which the S&P 500 edged down 0.02%.
Sources: Financial Times, IG
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