A look at the day ahead in U.S. and global markets from Mike Dolan The eye-watering surge in long-term U.S. government borrowing costs continues to pummel ...
Watch onThe eye-watering surge in long-term U.S. government borrowing costs continues to pummel world markets everywhere as investors fear 30-year yields above 5% are bound to sow financial distress somewhere in the system.
That's all on top of the ongoing rethink of the Fed's long-term rate horizon and increasingly high-pressure economy. Ten-year yields hit a whopping 4.88% early on Wednesday - an increase of 80 basis points in little over a month. But 30-year yields that briefly topped 5% today for the first time since 2007 will have set off as many alarm bells.
Although still relatively muted compared with the banking blowup in March, borrowing premia on U.S. corporate junk bonds are creeping higher again and have widened almost 40bp from the impressive lows set just two weeks ago. The gloomy rates picture is starting to floor stocks too - with a growing feeling that dysfunction in Washington and a Fed seemingly intent on tightening until something breaks all spells a rough end to the year just as another earnings season unfolds.
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