(BFM Bourse) – All bond yields are experiencing a strong surge and reaching their highest since March or even for several years, depending on the maturity, in Europe and the United States.
Central banks will raise their rates again, and the market is in trouble. All sovereign bond yields – that is to say the rates of government debt – of developed countries exploded on Thursday and reached their highest for several months or even several years.
Shortly before 5 p.m., the 10-year US Treasury yield peaked at 4.064%, its highest level for the year, and a peak not seen in over 15 years. The rate at 10 on gilts, British debt securities, is at 4.7%, its highest level since 2008. Remember that bond values move in the opposite direction to rates.
In the eurozone, the yield on the 10-year German Bund stood at 2.637%, its highest level since early March. Ditto for the rate at 10 in the bond equivalent to the French Treasury (OAT) at nearly 3.2%, again a high since the beginning of March.
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Freezing “minutes”
As for the two-year yield on the US Treasury, the maturity most sensitive to changes in monetary policy, it stood at 5.11%, a level not seen since 2006. Outside the United States, the French rate at two years peaked at more than 3.5% at its highest in just under 15 years. Same for German (3.33%).
Investors are anticipating further key rate hikes from the major central banks. The US Federal Reserve and the European Central Bank (ECB) have already signaled that they expect hikes at their meetings this July.
These speculations were reinforced by the publication of the “minutes”, i.e. the minutes of the last monetary policy meeting of the Fed in June, when the American central bank had opted for a pause on its tightening. monetary.
“You can see in the minutes that this June break was sharply debated and was not a consensual break. Perhaps the market is questioning its relevance, wondering if it might not have been better to win a months of intervention capacity of the Fed against inflation”, raises Alexandre Baradez, head of market research at IG France, who recalls that “the market is asking questions about the repercussions of the tightening of monetary policies on the economy”.
A strong ADP report
The ADP report on US employment, clearly above expectations, supports the trend a little more.
“If an interest rate hike (by the Fed, editor’s note) this month was not yet a given, it probably is now. The ADP report is not often an excellent precursor to official figures on the jobs, but this is a report you just can’t ignore,” said Oanda’s Craig Erlam.
At the level of the United Kingdom “It should be borne in mind that investors’ expectations concerning future increases by the Bank of England have only become more aggressive in recent days”, notes Deutsche Bank.
In an interview with the BBC on Thursday, Andrew Bailey, the Governor of the Bank of England, reiterated that the central bank must act immediately to reduce inflation or risk having to raise rates to higher levels. reported Reuters.
Julien Marion – ©2023 BFM Bourse