TSX falls as rising yields pressure financials and miners
EWC•Canada’s S&P/TSX Composite fell 1.33% to 35,174.22, its lowest level since October 1, as miners and financials led losses. Rising bond yields, elevated oil prices and inflation concerns weighed on risk appetite.
1. Financials and miners fall
The S&P/TSX Composite Index fell 1.33% to 35,174.22 points at 10:08 a.m. ET on Wednesday, touching its lowest level since October 1. The materials sector dropped 2.7% to a two-month low, while financials slipped 1.7%; Royal Bank of Canada and Toronto-Dominion Bank each fell more than 1.7%.
2. Yields climb
US 10-year and 30-year Treasury yields reached their highest levels since 2002, at 5.3177% and 5.6971%, respectively, while the Canadian 10-year government bond yield also edged higher. Gold fell 1.6% to a two-month low, while Brent crude rose 1.1% to $101.68 a barrel.
3. Rate expectations
Portfolio manager Matthew Kempton said bond yields had lately been a major driver of Canadian market performance and that higher rates could hurt financials as the yield curve flattens and spreads narrow. Traders expected the Federal Reserve to hold rates at its October meeting and priced in an 86% chance of a quarter-point December hike; Canadian investors were pricing in at least one 25-basis-point hike by year-end.
