Stocks, bonds in delicate dance
SPY•Global stocks fell as a bond selloff pushed long-dated U.S. yields to 24-year highs, before a strong 10-year Treasury auction and Fed meeting minutes eased some upward pressure on borrowing costs. The U.S. term premium rose 40 basis points in two weeks and reached a 12-year high of 96 basis points on Monday.
1. Stocks and bonds
Global stocks fell on Wednesday as a renewed bond selloff lifted long-dated U.S. yields to 24-year highs. A 10-year Treasury auction drew its strongest demand since 2016, while minutes from the Federal Reserve’s last policy meeting eased some upward pressure on borrowing costs.
2. Fed debate and yields
The minutes showed policymakers were divided over the rationale for the previous month’s rate hike. Some viewed it as a precaution against energy-driven price pressures or inflation expectations, while others saw it as the start of a response to demand-driven inflation. The U.S. term premium rose 40 basis points in two weeks and reached a 12-year high of 96 basis points on Monday.
3. Market moves
The S&P 500 and Nasdaq each fell 0.2%, while the Dow dropped 0.7%. European bonds came under pressure, widening the French-German yield spread by 10 basis points to 138 basis points; oil and gold also declined.
