Global bond markets rebounded on Wednesday after a brutal sell-off driven by inflation fears and worries the US economy is overheating. US, UK, German and Japanese yields all edged lower, while the yen strengthened on trader positioning ahead of China's Golden Week holiday.
US Treasury yields fell in London trading on Wednesday, retreating from levels hit in the previous session that were the highest in almost 25 years. The move offered investors relief after a sell-off that had gathered pace across global bond markets in recent weeks.
Treasury and European yields ease back
The yield on 30-year Treasuries fell 0.03 percentage points to 5.56%. The 10-year Treasury yield also dropped 0.03 percentage points, to 5.23%, pulling back from its post-2007 high.
European government bonds also rallied. The 10-year gilt yield fell 0.04 percentage points to 5.38%. The 10-year Bund yield dropped 0.03 percentage points, to 3.59%.
Brent crude rose 0.6% to $103.15 a barrel after falling earlier in the day. According to the Financial Times, Mizuho multi-asset strategist Evelyne Gomez-Liechti said "oil remains central to the rates story."
Fed signals no rush on rate hikes
The sell-off gathered momentum in recent weeks as strong US economic data bolstered bets on further interest rate rises by the Federal Reserve. New York Fed president John Williams said there was no need for urgency on the next rate increase, though one more rise later this year might be appropriate.
This month, the Fed raised rates for the first time since 2023. Futures traders are pricing in three to four more quarter-point increases over the next 12 months. Separately, Bank of Singapore chief economist Mansoor Mohi-uddin said the increasingly unsustainable US national debt pile was the fundamental driver of rising yields, adding these structural problems are unlikely to be addressed in the coming midterm elections.
Yen strengthens as Japan warns on intervention
The 10-year Japanese government bond yield slipped 0.03 percentage points to 3.06%. The yen strengthened 0.2% to ¥157.06 per dollar. Mohi-uddin said the move was probably down to traders positioning against possible intervention, as China's extended Golden Week holiday reduces market liquidity and would amplify the impact of any Japanese intervention.
Japanese finance minister Satsuki Katayama said the yen's valuation was problematic. Chief currency official Atsushi Mimura said Tokyo remained on high alert over the exchange rate.
Source: Financial Times
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