A cruel quarter for bonds
TLT•The U.S. 10-year Treasury yield rose 81 basis points in the July-September quarter, on course for its steepest quarterly rise since 2022 and reaching a 19-year peak. Japan’s 10-year bond yield climbed 42 basis points, its biggest quarterly rise in more than two decades.
1. Yields climb sharply
Bond markets faced a difficult quarter as inflation risks linked to the seven-month-long war in the Middle East heightened concerns about global fiscal health and borrowing costs. A hawkish shift by major central banks in September reinforced expectations that interest rates would stay higher for longer.
2. Stocks lean on AI
Stocks largely shrugged off high yields as investors pinned their hopes on AI, even as the investment needed for AI infrastructure raised concerns. Investors remained cautious about long-dated government bonds amid concerns over high government debt, while others found bonds more attractive as yields rose.
3. Data ahead
Economic releases scheduled for Wednesday included German retail sales, UK second-quarter GDP and September inflation data for France and Germany. October was set to bring U.S. jobs and inflation data, French budget talks, a UK budget and likely more bond issuance from tech firms.
