Treasuries sell-off pushes 10-year yields to 2023 high
Stocks deepened a slump, unraveling more of this year’s high-powered rally as Treasuries added to their decline. Investors braced for another interest rate increase from the Bank of England later Thursday.
Treasuries extended their selloff, pushing 10-year yields to around 4.15%, the highest this year, following hot labor-market data and a ramp-up in US government debt issuance.
European stocks fell 1% as they headed for their steepest three-day retreat since March. US contracts signaled further weakness after the worst session in three months for the S&P 500. The US benchmark slipped 1.4% Wednesday while the Nasdaq 100 slid 2.2%, sending the VIX index, known as Wall Street’s “fear gauge” to the highest since May. Asian shares also dropped for a third day.
“Given the recent rally in US stocks, especially in the Nasdaq, there’s a lot of sensitivity to rising yields, and the re-assessment of the value of equities to that of bonds,” said Gerry Fowler, head of European equity strategy and global derivative strategy at UBS Group AG. “In Europe, a lackluster earnings season is also weighing on the outlook. So many are taking the opportunity to implement a more bearish positioning.”
In the latest earnings news, Infineon Technologies AG plunged as much as 12% after disappointing forecasts from the German chipmaker. Deutsche Lufthansa AG dropped amid concerns over debt and higher costs.
Markets are leaning toward a 25 basis points increase by the BOE, but traders haven’t fully ruled out a 50-point hike as policymakers seek to subdue UK inflation that’s four times the official target. There’s also speculation the BOE will surprise economists by signaling an increase to the pace of bond sales as it looks to reduce its outsized
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