US 10-year Treasury yield hits highest in 10 months, drags on shares

economictimes.indiatimes.com:

Treasury yield on Thursday reached its highest in 10 months, underpinned by fears that U.S. interest rates might stay higher for longer, contributing, along with China's economic woes, to world stocks languishing at five-week lows. Benchmark 10-year yields reached 4.312%, testing October's 4.338%, a break past which would be its highest since 2007.

[US/] «The reason behind the rise is the strong data on U.S. domestic demand. The minutes (from the Fed's July meeting, released Wednesday), feel really dated, they are talking about a gradual slowdown in the U.S.

economy, but when you look at the data we are not even in a slowdown,» said Samy Chaar, chief economist at Lombard Odier. Those minutes showed policy makers were divided over the need for more interest rate increases, with some citing the risk to the economy of pushing hikes too far. U.S.

retail sales data came out strong earlier this week, and traders are also watching the Atlanta Federal Reserve's GDPNow forecast model, which showed the U.S. economy is likely to be growing at a 5.8% annualised rate in the third quarter. Expectations for U.S.

peak rates have not changed significantly, however. Rather, the changes in yields have been driven by changes in medium-term rate expectations. «What's interesting is usually when you have volatility around rates that's the market trying to price in a higher fed funds rate.

What's happening here is the market is pricing out cuts, or at least delaying them till later,» said Chaar. «The impact of higher yields is standard: a dollar that is well supported and equities under pressure,» he added. MSCI's world index was down 0.1% on Thursday, having dropped to its lowest level since July 6 early in the session.