INCREASE IN U.S BOND RETURNS GIVE A NEGATIVE IMPACT ON GLOBAL SHARES

04.03.2021
Market News

Concerns about rising U.S. treasury returns have frightened investors, further affecting global stocks on Thursday. Investors are now awaiting the reaction of Federal Reserve (Fed) President Jerome Powell, whether he will try to resolve concerns over the risk of a sharp increase in long-term borrowing costs.

The increase in bond returns also had a negative impact on "safe-haven" assets such as the yen, swiss franc and even gold.

The benchmark US 10-year bond yield has jumped to 1.477% with investors predicting that US inflation will increase as the economic recovery accelerates, driven by government stimulus and advances in vaccination programs.

According to Hirokazu Kabeya, head of global strategy at Daiwa Securities., The increase in bond returns is rising faster than public expectations and there are rumors that the authorities are likely to tighten their policies.

Shares of MSCI ex-Japan Asian-Pacific fell 1.7% in the early trading session on Thursday while the Japanese Nikkei declined 1.9%.

S&P E-mini futures recorded a drop of 0.4% while the Nasdaq also declined 0.6% to a two-month low.

Powell is scheduled to speak at 1.05am GMT +8 (early tomorrow morning). Most Fed officials underestimated the recent increase in treasury returns, but Fed Governor Lael Brainard on Tuesday acknowledged concerns a sharp increase in bond returns could affect economic activity.

For currency investors, they continue to buy the US Dollar (USD) on the expectation that the US economy will perform better than other developed countries in the coming months.

Against the yen, the USD has strengthened to 107.16 yen, the highest level in 7 months.

Gold, on the other hand, posted its lowest reading in nine months at $ 1,702.8 an ounce on Wednesday; is currently around $ 1,714.00.