Strong data send bond yields surging; concerns on unsustainable fiscal deficits rise
Treasury yields surged this week, sparking a broader selloff in global bond markets as investors brace for higher interest rates for longer.
Longer-dated US government yields reached levels last seen in the financial crisis, fueled in part by strong job-market data. That culminated with a report at the end of the week showing employment unexpectedly surged last month, bolstering the case for another Federal Reserve rate hike.
Governments took advantage of cheap borrowing costs during the pandemic to safeguard their economies.
Now they have to refinance that at a much costlier price, sowing concerns about unsustainable fiscal deficits.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
World
Not so long ago, families, businesses and governments were effectively living in a world of free money. As Treasury yields rise, that ripples out to broader markets, affecting everything from car loans to overdrafts to public borrowing and the cost of funding a corporate takeover.
For the past 18 months, Federal Reserve Chair Jerome Powell has frantically been trying to break Americans’ borrow-and-spend habits.
It’s critical to his fight against inflation. In C-suites across the country, though, CEOs and CFOs aren’t getting the message.
Australia, New Zealand, India, Kenya, Romania, Uganda and Serbia left rates unchanged.
Sri Lanka, Poland and Peru cut.
US
Nonfarm payrolls increased 336,000 last month — the most since the start of the year — after sizable upward revisions to the prior two months. The unemployment rate held at 3.8%, and wages rose at a modest pace.
When everyone expects a soft landing, brace for impact.
