PARIS (Agefi-Dow Jones)–Yields continued to rise on the markets on Friday, with those of sovereign bonds in the euro zone returning to a high of more than ten years.
The yield on the 10-year Treasury Bond (OAT) rose above 3% on Friday morning, for the first time since 2012. The yield on the 10-year German Bund hit 2.5% for the first time since mid-2011. The ten-year Italian construction rate for its part tested 4.90% in the morning
Around 2:20 p.m., the OAT yield gained 12.8 basis points (bp) to 3.085%, that of the Bund rose by 12.2 bp to 2.522%, and the BTP rate rose 16 basis points to 4.888 %.
In the UK, the gilt market is also affected by the correction, despite the resignation of Prime Minister Liz Truss on Thursday, the ten-year gilt yield jumping 26.3 bps, to 4.172%, but remaining far from the point high reached after the shock on the mini-budget. US debt is no exception. The ten-year yield on US government bonds rose 8.8 bps to 4.320%, the highest since 2007.
Central banks should once again reiterate their determination to fight inflation, despite the risk of recession, over the next two weeks. After the European Central Bank (ECB) next week, the US Federal Reserve (Fed) and the Bank of England will meet the following week. Traders expect further sharp rate hikes – 75 bps – but also continued restrictive rhetoric as US data shows no real slump in activity, labor market stall and that inflation continues to accelerate in Europe.
On the money market, the Fed’s terminal rate expectations reached 5% for the first time for March 2023. The prospect of an increase in the financing needs of European States to deal with the energy crisis is also affecting the trend.
The rise in rates is further fueled by concerns about market liquidity. The ECB could advance on the reduction of its balance sheet (QT) and US government bonds could be affected by possible sales of securities from China and Japan to support their currency.
-Xavier Diaz, L’Agefi ed: VLV – ECH
Agefi owns the Agefi-Dow Jones agency
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October 21, 2022 08:27 ET (12:27 GMT)