The 10-year US Treasury yield pushed above 4.8% in European trading on September 8 while the dollar weakened and Brent crude neared $100 a barrel. Traders are pricing higher odds of a Federal Reserve rate hike next week, and the S&P 500 already sits above a yield level that has historically made stocks more sensitive to further increases.
Ten-year US Treasury yields rose 1.8 basis points to 4.802% in European trading on September 8, as investors priced in higher odds of a Federal Reserve rate hike next week following stronger-than-expected jobs data. Yet the dollar eased against a basket of currencies, weighed down by renewed gains in the yen, and the DXY dollar index fell 0.2% to 98.989. Crypto Briefing separately clocked the same 10-year yield near 4.808%, up 2.4 basis points, in early European trade, with the dollar index moving in the opposite direction even as yields climbed.
Fed and ECB decisions loom
Two central bank meetings now frame the week. The European Central Bank meets on September 10 and is widely expected to raise its deposit rate by 25 basis points to 2.50%. Days later, the Federal Reserve follows on September 16, with futures markets pricing a 59% probability of another hike. The 10-year German Bund yield also ticked higher, rising 1.2 basis points to 3.393%.
Yen's strength called persistent
The yen's gains are doing most of the work against the dollar. The yen hit a six-month high of 152.89 per dollar earlier Tuesday before trimming some of the move, leaving the dollar last trading 0.2% lower at 154.05 yen. According to Saxo analysts: "It's the most persistent strengthening move, now in its fifth day, in over a year."
Oil nears $100 on Iran tensions
Brent crude added to the pressure, as prices climbed 2.2% to $99.10 a barrel amid escalating tension between the US and Iran. The friction has raised concerns about supply disruptions through the Persian Gulf, a corridor through which roughly a fifth of global oil supply passes.
Indices sit above the sensitivity threshold
The combination leaves equity indices exposed. The S&P 500 has historically shown sensitivity to moves above 4.5% on the 10-year yield, and the current level sits well above that threshold, with no clear catalyst yet for a meaningful decline.
Sources: The Wall Street Journal, Crypto Briefing
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