9 October 2018

Bassanese Bites: Bond Breakout – Week beginning: 08 October 2018

The highlight of the past week was clearly the surge in US bond yields which helped drag down equity prices to a degree. Having broken through previous year highs at 3.10%, the dam wall burst and quickly pushed US 10-year bond yields to 3.24% – on the back of ongoing strong US economic data and seemingly hawkish comments from Fed chairman Powell.

The bond sell-off began on Wednesday following a jump in the US ISM non-manufacturing index from an already strong 58.5 to a blistering 61.6. There followed a strong ADP payrolls report (a precursor to the official payrolls report) and then a speech from Fed chairman Powell, in which he suggested rates were still well below neutral and might need “to go past neutral” at some stage.

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