US Dollar Jumps as Government Bond Yields Rise

Thursday, 26 Apr, 2018

Trader Michael Milano works on the floor of the New York Stock Exchange, Monday, April 23, 2018.

The benchmark 10-year note yield edged up to 3.035 percent for a second day as jitters about growing federal borrowing spurred more selling in USA government debt.

The impact is already reverberating in many emerging markets, with JPMorgan's emerging market bond index .JPMEPR hitting a two-month low.

The Dow Jones Industrial Average fell 14.25 points, or 0.06 percent, to 24,448.69, the S&P 500 gained 0.15 points, or 0.01 percent, to 2,670.29 and the Nasdaq Composite dropped 17.53 points, or 0.25 percent, to 7,128.60.

Several chip makers had flagged near-term concerns about smartphone demand, adding to worries over a US ban on companies exporting goods to Chinese telecom-equipment firm ZTE.

Turning to recent news and events, 10-year US Treasury bonds are now yielding 3.003%. The yield inched past 3 percent shortly after the open of stock trading on Tuesday before pulling back slightly.

All eyes will be on scandal-hit social media firm Facebook FB.O , down 0.3 percent, when it reports results after the closing bell.

And then? Bye-bye bull market.

"The 10-year is potential competition for stocks", said David Kass, a professor of finance at the University of Maryland. It is the current income return you receive when, for instance, you own a bond, as measured by a percentage. It shed 1.4 percent to $67.70 on Tuesday.

The level itself doesn't signal recession.

The yellow metal rose 0.5 per cent on Tuesday to break a three-session losing streak.

WALL STREET: Shares yielded early gains to end almost unchanged.

In Asian trading on Thursday, the 10-year Treasury yield last stood at 3.022 per cent. This one is my favorite tool for gauging the stock market's near-term path of least resistance.

Among smaller banks, Simmons First National rose 3.8 percent to $30.05 and Banner gained 4.4 percent to $58.26. "Equity flows have been roughly flat this month".

"Expectations towards U.S. rate hikes being gradual are enabling equities to take the current yield rise in stride".

"It's not like an automatic trigger for the stock market", Ryan said. It hadn't reached 3 percent since early January of 2014. It's not just the level of the yield, but the speed. Hong Kong's Hang Seng declined 0.5 percent.

As the 10-year is such a benchmark for global debt, it means that the debt repayments for a whole range of companies also rise.

Supply and demand of government bonds.

Bond yields move higher as bond prices move lower.

"The 10-year is very visible", Kass said.

Long-term interest rates affect corporate financing and housing loans, and a sudden rise is considered to have a negative effect on the economy. "There might be some investors who hadn't bought insurance before who think now is a good time to get in". That pushed stocks higher by making bonds less appealing by comparison.

Gold fell on Wednesday as the dollar and U.S. Treasury yields jumped on robust U.S. data and signs of an easing in the U.S.

Let's start with the second question first; people care for a number of important reasons. In addition, large companies such as Caterpillar have warned about increased cost pressures.

It could be an interesting few months for markets. "If the 10-year ticks higher, mortgage costs are going to go higher".