Treasury yield curve hit its steepest in more than two months yesterday, while stock markets around the world inched higher as Apple shares gained.
Deepening worries over the ability of the world’s major central banks to stimulate growth have triggered a recent rise in bond yields and sparked a bout of risk-off trading.
Eurozone bond yields rose across the board after European Central Bank Executive Board member Sabine Lautenschlaeger said the central bank should hold off on new monetary easing measures.
Most yields touched their highest levels since Britain’s vote to leave the European Union in late June, extending a rise that started after the ECB’s policy meeting last week disappointed investors by introducing no new easing measures. In the US market, bond weakness ebbed after a dramatic sell-off on Tuesday sent long-dated yields to three-month highs.
US long-dated bonds have underperformed in the past month, in line Japanese government bonds as the Bank of Japan studies options to steepen the yield curve.
Yesterday, the gap between five-year Treasury note yields and 30-year bond yields widened as far as 123.40 basis points, the widest since July 1.
Benchmark 10-year Treasury notes were last up 5/32 in price to yield 1.72 per cent, from 1.73 per cent on Tuesday.
The US dollar eased from an eight-day high against the yen as doubts grew that the BOJ would intensify its stimulative monetary policies next week.
The BOJ will consider making negative interest rates the centerpiece of future monetary easing, sources told Reuters. The move would underscore concerns over limits to economic stimulus efforts.
At the same time, uncertainty about the outlook for US interest rates pressured the greenback against other currencies. The dollar eased from a session high of 103.34 yen touched in early trading and was last up just 0.05 per cent against the Japanese currency at 102.58 yen.
Shares of Apple jumped 3.4 per cent to $111.65, helping US stocks recover from losses the previous day, on reports of strong demand for the new iPhone.
The Dow Jones industrial average was up 13.25 points, or 0.07 per cent, to 18,080, the S&P 500 had gained 3.19 points, or 0.15 per cent, to 2,130.21 and the Nasdaq Composite had added 24.08 points, or 0.47 per cent, to 5,179.33.
MSCI’s all-country world stock index was up 0.1 per cent, while European shares were near flat.
Oil prices fell, extending recent losses. Brent crude futures were down 1.4 per cent at $46.44 a barrel, while US.crude was down 1.7 per cent at $44.12. Data showed large weekly builds in US petroleum products that overshadowed a surprise draw in crude stockpiles.