Bond yields rise and stocks weaken as doubts about rate cuts resurface

Bond yields rise and stocks weaken as doubts about rate cuts resurface
Bond yields rise and stocks weaken as doubts about rate cuts resurface

U.S. government bond yields hit a nearly four-week high on Wednesday, sending global peers higher and weighing on stocks, as data sowed fresh doubts about the timing and extent of bond cuts. Federal Reserve rate.

At the same time, crude oil rose for the fourth day to reach its highest level in a month, amid speculation that OPEC+ will continue production cuts at a meeting this Sunday and new tensions geopolitics.

U.S. yields rose after consumer confidence data came in higher than expected Tuesday, Minneapolis Fed President Neel Kashkari said further rate hikes were still possible, and two sell-offs auctions of Treasury securities were poorly received by investors.

The benchmark 10-year US Treasury yield climbed to 4.576%, a level not seen since May 3, and gained 2 basis points to 4.566%. Yields move inversely to prices.

The yield on German 10-year bonds rose to 2.637%, its highest level in a month, and was last at 2.609%. Meanwhile, Japanese equivalent yields rose to their highest level since December 2011, at 1.081%, on expectations that the Bank of Japan could soon raise interest rates again.

“Those expectations of a Fed rate cut have been reduced,” said Aneeka Gupta, director of macroeconomic research at WisdomTree. “Last night, Neel Kashkari mentioned that we still can’t rule out the possibility of a rate hike in 2024.”

The sharp improvement in the US consumer confidence index in May left the market uncertain about the strength of the economy and persistent inflationary pressures, which in turn are clouding the outlook for policy developments. the Fed.

According to the CME Group’s FedWatch tool, traders currently estimate about a 44% chance of at least a quarter-point cut in interest rates by September, following this data, after a draw takes place one day earlier.

European stocks opened lower, with the continental STOXX 600 index falling 0.4% for the second day. The British FTSE 100 index lost 0.22% and the German DAX index fell 0.44%.

US stock futures were also in the red, with S&P 500 contracts down 0.48% and Nasdaq contracts down 0.56%.

Gupta said the release of U.S. personal consumption expenditure inflation data on Friday will be an important guide to the Fed’s policy. Economists expect PCE inflation – the Fed’s preferred measure – to remain at 2.7% in April compared to the same level in March.

“If we see a slight slowdown on Friday, that will strengthen the possibility of a rate cut in September,” Gupta said.

Before that, German inflation data for May is due later on Wednesday, ahead of the wider eurozone reading on Friday.

The dollar hit a four-week high of 157.4 yen on Wednesday, boosted by higher U.S. bond yields. It rose about 0.2% against the euro, to $1.0839.

In energy markets, Brent crude oil futures for July delivery rose 0.65 percent to $84.78 a barrel, the highest since May 1, while futures on American crude oil increased by 0.74% to 80.42 dollars.

Oil prices gained more than a dollar a barrel Tuesday on hopes that OPEC+ will maintain crude supply curbs at its June 2 meeting, as the summer driving season begins in the United States. United States and Israel’s assault on Rafah, next to the Egyptian border, has added to geopolitical tensions.

Star stocks in mainland China rose 0.12% after the IMF raised its economic growth forecast for the country.



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