Government bonds under pressure as traders prepare for Fed rate rise

Government bonds were under pressure on Wednesday as traders prepared for the US Federal Reserve to raise interest rates aggressively and central banks around the world moved to tighten monetary policy to fight inflation.

The yield on the 10-year US Treasury bill rose by 0.05 percentage points to just over 3%, then narrowed to 2.98%, with German and Italian debt falling and those in Australia and India experiencing heavier declines.

The 10-year US yield, a benchmark for global credit costs, stood at 1.7% just two months ago.

The Treasury Department’s two-year yield, more sensitive to policy, rose 0.03 percentage points by 2.8 percent by noon in New York.

Later on Wednesday, the US Federal Reserve is expected to announce its first rate hike of 0.5 percentage points since 2000. Contract markets are pricing half-point gains at the Fed’s next meetings in June, July and September.

“There are some hawkish expectations for the Fed, including fears in the market that they could open the door to 75 basis points [0.75 percentage point] Interest rates will rise in the future, “said Cosimo Marciolo, head of absolute fixed-income return at fund manager Amondi.

The annual rate of consumer price inflation in the US Reached 8.5 percent In March, when energy and food costs rose in response to Russia’s invasion of Ukraine. Inflation in the eurozone is at a high of 7.5 percent.

Australia’s 10-year bond yield rose Wednesday by more than 0.2 percentage points to 3.57%, with the price falling significantly. The country’s central bank on Tuesday Raise the principal interest rate At 0.25 points, a larger percentage than expected – this first move in more than a decade.

“Australia launched the gun in a week where we have more important central bank meetings,” Brooks McDonald’s chief investment officer Edward Park said of the impending Fed decision, as well as the Bank of England’s expected rate hike on Thursday. “It was a firm reminder that the bond markets can be captured.”

Germany’s 10 – year yield touched almost 1.04%, then stabilized at just under 1%, after European Central Bank policy maker Isabel Schnebel Told The German publication Handelsblatt that a rise in interest rates in July was “possible”.

Meanwhile, the 10-year yield on Indian bonds rose 0.26 percentage points to 7.4%. The Central Bank of India on Wednesday Announced a surprising 0.4 percentage point increase in interest rates, the first increase in almost four years.

Analysts predict that the Fed, too institutionalize How will it reduce the $ 9 billion balance, what? balloon During the corona crisis, when the central bank bought bonds at an unprecedented rate, suppressing debt yields and increasing investors’ appetite for more risky assets.

In April, while speculation was building about the world’s most influential central bank, which is rapidly returning its support during the epidemic, Nasdaq’s high-tech stock index on Wall Street fell 13.3%.

The S&P 500 blue-chip stock index ranged from small gains to losses in afternoon trading in New York on Wednesday, while the Nasdaq fell 0.3 percent.

Europe’s regional stock index Stoxx 600 closed down 1.1% after Brussels proposed banning Russian oil, sending Brent crude up more than 3% to $ 108.56 a barrel.

Government bonds under pressure as traders prepare for Fed rate rise Source link Government bonds under pressure as traders prepare for Fed rate rise

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