Treasury yields climb as rate-increase fears mount

Bloomberg

Sovereign bonds extended declines on Tuesday, with the 10-year Treasury yield approaching 2% as investors grapple with the implications of global monetary-policy tightening.
The US 10-year yield climbed above 1.95%, a level last seen in December 2019, with some investors predicting it could rise as high as 3% this year as the Federal Reserve battles the hottest inflation since the 1980s. Yields ticked higher through most of Europe as power prices in the region surged, adding to worries about price pressures. The
dollar gained against a basket of peers.
Basic resources led an advance in the Stoxx Europe 600 index as iron ore roared past $150 a ton after China gave country’s steel industry more time to rein in carbon emissions. BP Plc gained after reporting strong earnings and announcing a share buyback, but BNP Paribas SA dropped about 4% after fourth-quarter revenue missed analysts’ estimates. S&P 500 and Nasdaq 100 and European futures fluctuated after Wall Street stocks ended a choppy session in the red, hurt by the technology sector.
Investors are awaiting data on Thursday expected to show stubbornly high US inflation. That could inject further volatility into financial markets bracing for a Federal Reserve cycle of rate hikes and eventual balance-sheet reduction.
“Markets will get used to the tightening regime at some point,” Chris Iggo, chief investment officer, core investments at AXA Investment Managers, wrote in a note. “The growth and earnings forecast revisions in the next few months will be the key.”
Japanese shares advanced, aided by a weaker yen. China’s CSI 300 index falls but came off its lows. Traders were assessing a Chinese central bank statement signalling property-loan curbs for low-cost public rental homes are being eased.
Oil’s scorching rally took a breather, with attention turning to Iran nuclear talks that could lead to a resumption of official crude exports from the Persian Gulf producer. Bitcoin pushed towards $45,000.
Investors are assessing the likely broader impact of Fed policy, “particularly within credit markets,” Kristen Bitterly, head of North America investments at Citi Global Wealth, said on Bloomberg Television. “That is what most investors are looking at right now in terms of what can actually inject volatility into the broader market.”
Elsewhere, traders were monitoring a flurry of diplomacy involving the French, Russian, US and German leaders, trying to assess if the tension over Ukraine can be defused.
The Stoxx Europe 600 rises 0.4% as of 8:14 am London time and futures on the S&P 500 were little changed.
While futures on the Nasdaq 100 were little changed, futures on the Dow Jones Industrial Average rise 0.1% and the MSCI Asia Pacific Index falls 0.1%. The MSCI Emerging Markets Index also drops 0.3%.
The Bloomberg Dollar Spot Index rises 0.2% and the euro also falls 0.3% to $1.1403.
While the Japanese yen falls 0.3% to 115.43 per dollar, the offshore yuan drops 0.2% to 6.3747 per dollar and the British pound was little changed at $1.3529.
The yield on 10-year Treasuries advanced three basis points to 1.95% and Germany’s 10-year yield was little changed at 0.23%. Britain’s 10-year yield advanced two basis points to 1.43%.
While Brent crude falls 0.8% to $91.95 a barrel, spot gold was little changed.