Receive free Markets updates
We’ll send you a myFT Daily Digest email every morning with the latest market news.
US Treasury bonds came under pressure on Thursday and equity markets wobbled as investors weighed the impact of weaker inflation data against a weaker-than-expected 30-year bond auction.
The U.S. Treasury sold $23 billion in long-dated notes ahead of the offer period at a hefty yield of 4.189 percent, slightly above market levels. The coupon on the new debt was the highest since June 2011.
Analysts at Action Economics said soft pricing caught markets flat-footed.
“Yields have skyrocketed, led by the long end of a bearish trade,” he added.
In so-called bear steepeners, long-term yields are rising faster than short-term yields, suggesting that investors expect the cost of money to rise going forward.
The yield on the benchmark 10-year Treasury bond rose 0.09 percentage point to 4.1 percent, reversing falls in the opening hours of the trading session. The two-year yield increased by 0.04 percentage points to 4.84 percent. Bond yields rise while their prices fall.
On Wall Street, the blue-chip S&P 500 index ended unchanged after shedding gains of more than 1 percent earlier in the session on inflation data. The tech-heavy Nasdaq Composite gained 0.1 percent.
Thursday’s moves came after the latest US inflation data showed prices rose at an annual rate of 3.2 percent in July, slightly below the 3.3 percent expected. The value was over 3 percent in the previous month.
Core inflation, which excludes volatile food and energy prices, came in at 4.7 percent on Thursday, also slightly below the 4.8 percent forecast by economists polled by Reuters.
The dollar, which frequently follows interest rates, rose 0.2 percent against a basket of its major trading partners
Market moves on Thursday also came after initial jobless claims for the world’s largest economy came in at 248k in the week ended August 5 — higher than the consensus estimate of 230k and up from 227k a week earlier.
The labor market has shown relative resilience in recent months, despite a string of aggressive rate hikes by the Federal Reserve, and is being closely watched for clues as to the likely path for monetary policy.
Futures markets are pricing in bets that the Fed is likely to hold rates steady at its September meeting after raising rates in July for the 11th time in 16 months to a range of 5.25 to 5.5 percent.
“We think the Fed is a long way from cutting rates,” said Wylie Tollette, Franklin Templeton’s chief investment officer for investment solutions.
“The Fed clearly has work to do – we’re still way above its 2 percent target. “It was a lot faster to go from 9 percent to 3.2 percent than it will be from 3.2 percent to 2 percent,” he added.
Meanwhile, European and Asian stocks rose. In particular, stocks sensitive to consumer spending rose after China announced it was resuming group travel to a list of 78 countries after closing its borders for nearly three years during the coronavirus pandemic.
The pan-European Stoxx Europe 600 index rose 0.8 percent, extending gains from the previous session, while France’s Cac 40 rose 1.5 percent and Germany’s Dax rose 0.9 percent.
Japan’s Topix rose 0.9 percent. South Korea’s kospi fell 0.1 percent, but the declines were offset by gains in travel and leisure businesses.
The Stoxx Europe Luxury 10 Index rose 2.7 percent as investors expected demand for goods to pick up once consumers start to travel in the world’s second largest economy.
European natural gas prices fell after two Australian liquefied natural gas producers held talks with unions on Thursday to avoid a strike that could disrupt global supplies.
The futures price for the Title Transfer Facility, the European benchmark, rose nearly 40 percent on Wednesday to its highest level since mid-June amid fears the strike would raise prices for buyers in Europe.
Chinese stocks barely responded to a US executive order restricting investment in the country’s quantum computing, high-chip and artificial intelligence industries. China’s CSI 300 gained 0.2 percent while Hong Kong’s Hang Seng was flat.
Comments are closed.