How a rising 10-year Treasury yield pinches Americans

How a rising 10-year Treasury yield pinches Americans

How a rising 10-year Treasury yield pinches Americans

A sell-off in U.S. Treasuries pushed yields to multi-year peaks on Thursday as robust economic data and hawkish speeches by Federal Reserve officials stoked concerns about inflation, weighing on stock markets globally.

'In general, what's driving emerging market weakness is a stronger U.S. economy. there is a lack of clarity on the effectiveness of rate hikes as a currency defense, ' said Sunil Sharma, chief investment officer with Sanctum Wealth Management. That's a good sign for stocks. This time it wasn't only the rate-sensitive two-year yields that marched higher.

Federal Reserve Chairman Jerome Powell declared the economic outlook was "remarkably positive" and said rates might rise above "neutral", now anywhere from 2.5 to 3 percent.

'Whatever the Fed's concept of the neutral interest rate is, it must be rising, ' Bourgette said. Nixon said that means the Fed is intent on raising rates further, and investors aren't sure when it intends to stop.

FILE- In this May 10, 2018, file photo, the opening bell hangs above the trading floor at the New York Stock Exchange. A spike in this market-driven rate could also result in market turbulence, putting a dent in the 401 (k) retirement savings accounts of millions of workers who own stocks and bonds.

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In Singapore, the key Straits Times Index dipped to an intraday low of 3,198.72 before settling at 3,209.79, down 21.8 points or 0.67 per cent.

Technology and internet companies and smaller, more US -focused companies continued to suffer steep losses.

The Dow Jones Industrial Average lost 78 points, or 0.3 percent, to 26,749.

For an exodus of investment dollars out of equities and into bonds to occur, bond yields may have to go well past 3.5 percent, according to Bloomberg. That was both indexes worst weekly loss in more than six months. The Russell 2000 index was unchanged at 1,646.

The yield on the benchmark 10-year note US10YT=RR hit a seven-year high of 3.232 percent following data released the previous day that was seen as increasing the odds a Friday payrolls report would also be stronger than expected.

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"A simple dynamic is playing out in the global economy right now - the booming, while most of the rest of the world slows or even stagnates", said HSBC economist Kevin Logan.

The government Thursday said state-owned fuel retailers will have to complete Dollars 10 billion external commercial borrowing (ECBs) within a year and they would not be required to hedge the exposure. They have also risen an staggering 15-20 per cent since mid-August.

Ten of the 11 major S&P sectors were lower, led by a 1% drop in the communication services sector, where heavyweights such as Facebook fell 1.2%, and Alphabet and Netflix slid 1.7% each.

Bank of America Merrill Lynch in a report explained that pre-committing United States dollars 8 billion a month for it over and above the USD 25-30 billion lost in interventions since April will push the overall forex reserves below the critical eight-month import cover mark.

"It's more trade worries than anything else because these companies, they either sell a lot to China or produce a lot in China", said Matt Maley, equity strategist at Miller Tabak + Co.

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