The broader risk mood is worsening on the session as we see oil prices ramp higher while stocks and precious metals sink lower. At the same time, we’re seeing bond yields extend higher with Treasury yields jumping across the curve. 30-year yields broke the pivotal 5% threshold earlier this week and we’re seeing everything run up now in the final trading day.
Of note, 10-year yields in the US are up by over 8 bps to 4.54% – its highest since May last year. Meanwhile, 2-year yields are also shooting higher in moving back above the 4% threshold. That is a big momentum shift after having struggled to clear the 4% mark in March before falling to as low as 3.70% in April. And now, the tide is changing and we’re seeing a breakout as the bond market faces a rout.
US 10-year Treasury yields (%) daily chart
US 2-year Treasury yields (%) daily chart
While equities have been racing higher for many weeks already, the situation in the bond market continues to signal worries about inflation and a worsening global economic picture.
And with the break of the key thresholds in Treasuries noted above, it looks like broader markets are having to stand up and take notice now as something’s gotta give.
As such, that is lending itself to a more risk-off wave across markets with the drop in US futures threatening to wipe out the gains for the week. S&P 500 futures are down 1% while Nasdaq futures are down by 1.3% currently.
In turn, the dollar is ramping higher across the board in the major currencies space. EUR/USD is down 0.3% to 1.1630 while GBP/USD is down 0.4% to 1.3345 as sterling is also suffering from political uncertainty back home. UK prime minister Starmer’s future hangs in the balance and that is compounding woes for the currency as gilt yields also jump up amid a double whammy.
