Franklin Templeton experts balance a higher-rate world and weigh midterm impacts
Professionals anticipate higher volatility in the near term, while examining the risks and opportunities amid rising interest rates, with a yearend view.
Professionals anticipate higher volatility in the near term, while examining the risks and opportunities amid rising interest rates, with a yearend view.
Treasury Secretary Scott Bessent said Tuesday that dollar-pegged stablecoins could help expand market demand for U.S. government debt, lowering the pressure on long-dated bond yields.
It's the same task the Fed chairman fumbled in July, when investors took a rate hold in stride but balked at Warsh's unwillingness to signal borrowing costs might need to move higher.
Since the turmoil in France escalated from the end of last month, moves in that country's bonds have affected Treasuries several times — either by pushing them down in tandem or causing flows into U.S. debt as a haven trade.
Traders priced in a roughly coin-toss probability that the U.S. central bank boosts rates at its October meeting after consumer prices advanced at the fastest pace in five months.
The risk stems from the way traders provide the bonds that are delivered when futures contracts are settled.
During the past few weeks the term premium spiked to levels not seen in over a decade and drove the latest leg of the bond selloff that's sent US Treasury yields to a 24-year high.
Thirty-year bonds wiped out an early loss to advance on Thursday, with yields down a basis point to 5.66% — just off their highest levels since 2002.
The global bond market has been hammered in recent weeks as elevated energy prices fueled concerns about faster inflation and further central-bank rate increases.
Investors remain wary of calling a top in yields after a steady march higher from mid-August as the economy expands amid booming AI infrastructure spending.
Treasuries rose on Friday after the US added fewer jobs than expected in September and unemployment edged higher, pushing the yield on two-year notes lower by as much as 10 basis points to 4.69%.
The yield on the 10-year Treasury note briefly rose above its 2007 peak to trade at 5.34% on Thursday. Earlier this week, the rate on 30-year US bonds also hit a 24-year high.
The latest leg higher came as elevated energy prices added to inflationary pressures and corporate new issues weighed on the market.
The declines pushed most US yields higher by 10 basis points in mid-morning trading, with 10- and 30-year benchmark yields near the highest since 2007 and 2004.
A fresh jump in oil prices on Thursday lifted five- to 30-year Treasury yields to new multiyear highs in choppy U.S. trading, with the 30-year rising as much as seven basis points to 5.47%, its highest since 2004.
Rising oil prices sparked the declines earlier in the session, fanning worries around elevated inflation and punishing European government debt as well.
While the Fed move was expected, Chairman Kevin Warsh's rhetoric on inflation drove up market-implied expectations for at least one more increase this year and as many as two more in 2027.
Economists in a recent Bloomberg survey expected policymakers to hold their outlooks for unemployment and inflation largely unchanged.
There has been a stark change in regime when 10-year yields go much above 5.25%. After that point, the risks to bond volatility and hence stock vol and credit spreads markedly increase.
nterest-rate swaps showed traders ramped up bets on higher benchmark rates in the months ahead, with sticky price pressures seen pushing policymakers led by Fed Chairman Kevin Warsh to act.
Couldn’t load more articles. Try again.