Bond Yields Hit Milestones in Global Hike Marathon: Markets Wrap

This content was published on September 22, 2022 – 18:03

(Bloomberg) – Treasury bond yields soared to multi-year highs after a parade of global central banks joined the Federal Reserve to hike interest rates in a bid to curb searing inflation at the expense of economic growth.

US 10-year yields hovered 3.7%, the highest since February 2011, while 2-year yields were above 4.1%. Stocks emerged from session lows, with gains in defensive stocks cushioning a decline in Big Tech. Sentiment was still weak, with some prominent Wall Street voices forecasting that the S&P 500 could test its June bottom, which is less than 3% below current levels.

The dollar stayed near its all-time high. The greenback has risen the most against its peers in decades, buoyed by dovish Fed policy and investors looking for a haven. The Swiss franc tumbled as a central bank rate hike proved insufficient to meet expectations, while Japan supported its currency for the first time since 1998.

The Fed has given its clearest signal yet that it is willing to tolerate a recession as a necessary compromise to regain control of inflation, with officials forecasting a further 1.25 percentage point tightening before the end of the year. Norway, Britain and South Africa also followed with hikes of their own as officials rush to get a grip on rampant price hikes.

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“We see this new higher rate path as significantly more likely to have a hard landing for an extended period of time and therefore not only clearly hawkish but clearly risky,” said Krishna Guha, vice chairman of Evercore ISI.

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According to Berenberg strategists, including Jonathan Stubbs, the S&P 500 could be primed for further downside after breaking through a rare technical indicator.

It has traded below its 200-day moving average for over 100 sessions – a streak previously only broken during the tech bubble and global financial crisis of the past 30 years. In both cases, the index recorded most of its losses after surpassing those levels, with the index falling another 50% in 2000-2003 and 40% in 2008-2009 before bottoming, they said.

Evercore’s chief equity and quant strategist Julian Emanuel cut his year-end forecast for the S&P 500 to 3,975 from 4,200 and expects a “full retest” of the June low in the coming weeks. The target cut reflects the rising likelihood of a recession after Fed Chair Jerome Powell warned that the process of raising rates for jobs and housing will not be “painless”.

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“The bad news is we’re still in one of the weakest seasonal windows of the year, especially in a mid-term year,” said Jonathan Krinsky, chief market technician at BTIG. “The good news is that it will reverse quickly by mid-October. We think we will test or break the June lows before then, which should provide a better entry point for a year-end rally.”

22V Research’s Dennis DeBusschere expects markets to remain volatile but maintains his neutral, range-bound stance on equities.

“It’s difficult to go long until we get signs of slower underlying demand growth, but tail risk is limited by already tighter financial conditions, lower PEs and higher implied volume,” he wrote.

According to Mark Haefele of UBS Global Wealth Management, the environment does not lend itself to strong directional positioning on overall indices. However, he advises against retreating to the sidelines, “particularly given the strain on cash from high inflation and the challenge of timing a return to markets without missing rallies.”

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“Instead, we remain invested but also selective, focusing our preferences on the themes of defensiveness, income, value, diversification and safety,” he added.

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Here are some of the key movements in the markets:


  • The S&P 500 was down 0.5% as of 2 p.m. New York time
  • The Nasdaq 100 fell 0.9%
  • The Dow Jones Industrial Average was little changed
  • The MSCI World Index fell 0.8%


  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at $0.9843
  • The British pound was little changed at $1.1266
  • The Japanese yen rose 1.2% to 142.29 per dollar


  • The 10-year government bond yield rose 15 basis points to 3.68%
  • The 10-year German government bond yield rose seven basis points to 1.96%
  • The 10-year UK government bond yield rose 18 basis points to 3.50%

raw materials

  • West Texas Intermediate crude was up 0.9% to $83.65 a barrel
  • Gold futures rose 0.3% to $1,680.50 an ounce

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