US Stocks Drop as Bond Yields Rise Amid Tariff and Uncertainty
US stocks declined as a bond sell-off caused spillover effects into the equity markets, highlighting increased financial market volatility.
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Bond Sell Off
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Asian Stocks Slide as Middle East Tension and Bond Sell-Off Weigh
Asian stocks slipped as risk aversion increased due to concerns over Middle East conflict, while the bond sell-off intensified, pushing Treasury yields to fresh 16-year highs ahead of a speech by Fed Chair Jerome Powell. Investors sought safer assets, keeping gold prices near two-month peaks and the dollar firm. The gloomy mood is expected to continue in Europe, with stock markets in the region set for a lower open. Geopolitical risks, including a widening U.S. chip export ban and concerns over China's property sector, also weighed on investor sentiment.
Bond Market Turmoil: Historic Collapse and Surging Borrowing Costs
The sell-off in Treasury bonds, particularly those with maturities of 10 years or more, has reached historic levels, with losses of 46% since March 2020. This surpasses the losses seen in the stock market during the dot-com bubble burst and is even worse than the bond market crash of 1981. The aggressive turn towards monetary tightening by the Federal Reserve, concerns about rebounding inflation, and a surge in Treasury issuance have all contributed to the bond market rout. Investors, including Bill Ackman, Ray Dalio, and Bill Gross, anticipate the 10-year yield hitting 5% in the near future.
Global Stocks Rally as US Treasury Yields Ease, Boosting Asian and European Markets
European stocks opened higher as US Treasury yields paused their surge after a drop in oil prices and softer US labor data. Asian shares also rebounded, while China's mainland markets remained closed for holidays. The bond sell-off paused after a cooler-than-expected US private payrolls report and a 5% drop in oil prices. European government bond yields were mixed, and European stock indexes were mostly slightly higher. Traders are now awaiting US jobs data to determine if the bond sell-off will continue. The US dollar index weakened, and oil prices held steady.
"Long-Term US Yields Surge, Triggering Intensified Bond Sell-Off"
The bond sell-off continues as long-term US yields reach a 16-year high, causing market volatility. Investors are concerned about rising interest rates and the potential impact on the economy.