The bond selloff continued on Monday as Treasury yields climbed and sovereign debt in Australia and New Zealand slid on concerns about faster inflation, tempering stock market optimism from positive vaccine news.
Ten-year Treasury yields climbed to the highest in about a year and an Asian stock gauge turned lower amid a surge in metals that put the focus on risks to the economic recovery if price pressures mushroom. S&P 500 and European equity futures fall after the US index slipped. The dollar edged up.
Among commodities, copper hit the highest in over nine years and crude oil advanced, hovering around $60 a barrel. Bitcoin notched another record over the weekend, spurring a rally in the shares of Asian cryptocurrency stocks.
Sovereign bonds have slid on expectations that vaccines and more fiscal stimulus will spur a global rebound and fan inflation. In Israel, the Pfizer Inc. and BioNTech SE Covid-19 shot
appeared to protect the vast
majority of recipients from infection. Progress against the disease has aided stock and commodity markets this year, but investors are also asking whether the reflation trade will drive up yields to a point that could hurt risk appetite.
“We are still in a risk-on environment,” Adrian Zuercher, head of global asset allocation at UBS Wealth Management, said on Bloomberg TV. “Everybody is playing out the outlook for better economic growth, the outlook for more fiscal stimulus. It’s normal that nominal yields are trending higher, equities are also trading high, and also
commodities based on a better economic outlook.”
US lawmakers are expected to make progress on a $1.9 trillion stimulus bill this week, and President Joe Biden’s administration may unveil a
multitrillion-dollar recovery package in March centered on infrastructure.
In Australia, the central bank resumed purchases of three-year securities to defend its yield target, underlining the challenge for central banks as they strive to keep borrowing costs low for years to come just as investors position for a more immediate return of inflation. Ten-year yields in both Australia and New Zealand surged more than 10 basis points on Monday.
Meanwhile, Federal Reserve Chair Jerome Powell will deliver the central bank’s semi-annual monetary policy report to the Senate Banking Committee on Tuesday.
S&P 500 futures fall 0.5% as of 7:09 am in London and the S&P 500 index falls 0.2%.
Japan’s Topix index rises 0.5% and Australia’s S&P/ASX 200 index fall 0.2%.
While Hong Kong’s Hang Seng index lost 0.5%, Shanghai Composite index shed 1.5% and euro Stoxx 50 futures fall 0.7%.
The yen was at 105.69 per dollar, down 0.2% and the offshore yuan was at 6.4641 per dollar, down 0.2%. The euro was at $1.2114 and the Bloomberg Dollar Spot Index added 0.1%.
The yield on 10-year Treasuries rise about four basis points to 1.38% and Australia’s 10-year bond yield rise 17 basis points to 1.60%.
While West Texas Intermediate crude increased 1.2% to $59.96 a barrel, gold rises 0.3% $1,790.36 an ounce.