In a rapid shift, 30-year bond yields have soared over 30 basis points in just one week, reaching a 12-year high at 4.6840%. Meanwhile, the 10-year real, inflation-adjusted yield has surged by 26 basis points to 4.50%, its highest level since 2009.
This upward movement in yields is narrowing the deeply-inverted 2-to-10-year yield gap, which has long signaled a looming recession but is now showing signs of closing to its smallest spread since May.
Market turbulence continues as U.S. Treasury exchange-traded funds (ETFs) have deepened their year-to-date losses to over 6% and losses over three years to more than 20%.
The U.S. Treasury is set to auction $48 billion in two-year notes on Tuesday, $49 billion in five-year paper on Wednesday, and $37 billion in seven-year notes on Thursday.
A government shutdown looms as Congress has yet to reach a budget deal, and Moody’s warns of potential sovereign credit rating implications.
Federal Reserve officials remain hawkish, with Minneapolis Fed Bank President Neel Kashkari suggesting further rate hikes may be necessary to cool the economy.
JP Morgan chief Jamie Dimon warns that the world may not be prepared for a 7% Fed rate.
The European Central Bank also signals a higher-for-longer approach, with ECB chief Christine Lagarde stating that record high rates could help meet the central bank’s 2% inflation target.
Market data reveals a deterioration in U.S. manufacturing activity and national business sentiment.
Despite a late rally on Wall Street, futures are down about 0.5%, mirroring losses in Asia and Europe as the end of the third quarter approaches.
China Evergrande shares continue to slide, dropping 8% after a missed bond repayment.
The U.S. autoworkers labor dispute persists, raising inflation concerns due to potential supply disruptions.
Key developments for Tuesday include U.S. consumer confidence data, new home sales figures, house prices, business surveys, and Treasury auctions. Federal Reserve Board Governor Michelle Bowman will also deliver remarks at a Washington conference.
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27th Spetember , 2023
Delino Gayweh
Serrari Financial Analyst
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