Global Bond Markets in Turmoil: Threat of More Rate Hikes Sparks Chaos, Wheat Prices Soar After Drone Attack
Government bond markets worldwide witnessed a dramatic selloff fueled by fears of additional interest rate hikes, leaving traders unsettled. German 30-year yields skyrocketed to their highest levels since January 2014, surging by as much as nine basis points. Meanwhile, ten-year Treasury yields also jumped by five basis points. US equity futures saw a modest rise, hinting at a potential rebound after Friday’s setback.
The unease among investors was compounded by Federal Reserve Governor Michelle Bowman’s comments over the weekend, hinting that rates might need to increase further to tackle inflation. The upcoming US inflation data set to be released this week is expected to add more volatility to the already precarious situation.
In addition to rate hike concerns, a larger-than-expected Treasury issuance plan and a downgrade in the US credit rating by Fitch Ratings have contributed to the bond market’s recent turmoil. A hawkish policy tweak by the Bank of Japan has further exacerbated market volatility.
The equities market witnessed mixed movements, with S&P 500 futures edging higher while European stocks faced a decline due to weak German industrial output figures, indicating economic vulnerability.
Investors are grappling with conflicting signals of persistent inflation and hopes for an end to the rate-hiking cycle, leading to contrasting positions between hedge funds and traditional investors. Speculative investors have increased bearish positioning to record levels, while traditional investors find themselves caught in misjudged bets on lower yields.
The market saw significant movements in individual stocks, with Tyson Foods Inc. (TSN) experiencing an 8% decline in premarket trading after reporting a significant drop in earnings and announcing the closure of more US chicken plants. Sage Therapeutics Inc. (SAGE) faced a steep decline of up to 53% as regulators approved its fast-acting pill solely for postpartum depression, denying clearance for major depressive disorder.
Looking ahead, this week will witness crucial events and data releases, including Japan household spending, US wholesale inventories and trade, China’s CPI and PPI, India’s rate decision, and US initial jobless claims and CPI, among others.
Amidst these developments, global stock futures showed mixed movements, and major currencies remained largely stable, while the cryptocurrency market experienced minor fluctuations. Bitcoin saw a slight decline of 0.4% to $28,991.5, while Ether remained relatively unchanged at $1,828.66.