Treasury yields extend slide on worries over economy

BLOOMBERG

Treasury yields extended a slump and US equity-index futures fluctuated as bets the world economy is set for a sharper slowdown outweighed concerns over elevated inflation and monetary tightening.
The two-year US rate, which is the most sensitive to monetary policy, slid for a fifth day, its longest streak since July 2022. Contracts on the Nasdaq 100 index fell 0.3%, while a gauge of global stocks headed for a weekly loss, after a private US jobs report and purchasing managers’ indexes provided further evidence the world’s largest economy is faltering.
Signs of slower activity have added to worries over the financial system sparked by bank failures. Economists now assign a 65% probability of a US recession and money markets see only a 44% chance the Federal Reserve will raise interest rates by 25 basis points in May. That marks a contrast to the start of the week when they had seen a 70 percent prospect of the hike. Now they also expect the central bank to start cutting rates as early as July.
“Overnight interest-rate swaps now price in a lower path for Fed rates than they did at the beginning of March,” UniCredit SpA strategists led by Marco Valli wrote in a note. “We regard this as an overshooting. The Fed will need to see substantial progress on core inflation moving down to 2% before it even considers rate cuts and, hence, policy rates will likely remain at their peak for longer than markets are now expecting.”
The moves in global markets were muted before the Easter holiday and many assets traded slightly risk-off. Treasuries rose, with the two-year yield falling 6 basis points to 3.72%, and government bonds climbed in Australia, New Zealand, the UK and Germany.
In commodities, oil headed for a third weekly gain as a surprise supply cut by Opec+ and a decline in the US inventories tightened the market outlook. West Texas Intermediate futures slid to about $80 a barrel on Thursday.
European stocks climbed, with the benchmark Stoxx 600 ending a three-day slide, as traders assessed trends in corporate earnings. Shell Plc advanced as preliminary figures showed the company maintained the performance at its gas-trading business despite a price slump. TUI AG jumped 12% after the tourism-services company said it expects summer travel bookings close to pre-Covid levels.
In premarket New York trading, FedEx Corp climbed 1.5% after Raymond James raised the stock to outperform. FedEx said it seeks to cut $4 billion in costs by combining its two main delivery networks. The Mosaic Co dropped 2.6% after JPMorgan Chase & Co downgraded the stock to neutral.
S&P 500 futures were little changed and Nasdaq 100 futures fell 0.3%. While futures on the Dow Jones Industrial Average were little changed, the Stoxx Europe 600 rose 0.5% and the MSCI World index was little changed.
The yield on 10-year Treasuries declined two basis points to as much as 3.29% and Germany’s 10-year yield declined four basis points to 2.15%. Britain’s 10-year yield declined two basis points to 3.40%.