Bond-market turmoil suggests investors are betting on higher interest rates for a longer period of time

A woman walks past the Bank of Canada headquarters in Ottawa, June 1, 2022. Yields on long-term Canadian and U.S. government bonds hit 16-year highs on Tuesday, before falling slightly on Wednesday.The months-long rout in global bond markets reached a fever pitch this week, as investors increased their bets that the world economy is entering a new era of stubborn inflation and persistently hawkish central banks.

The sharp repricing in bond markets has been supercharged by several factors impacting bond supply and demand, including a spike in U.S. government bond issuance and a pullback in demand for U.S. debt from Japanese investors. Canadian long-term bonds tend to move alongside U.S. bonds. Abrupt moves in bond markets can also trigger financial stability concerns. This happened in Britain last year when a swing in government bond prices squeezed poorly hedged pension funds and nearly sparked a fire sale in the gilt market.Strong U.S. economic growth and labour-market data in the face of 11 consecutive rate hikes by the Fed, has led many bond traders to discount the likelihood of a recession, and price in fewer rate cuts over the next few years.

“Our view is we’re probably back to the world that we saw from between 1993 to 2007, where when the Bank of Canada or the Fed cut rates, they cut rates to 3 per cent, when they hiked rates, they hiked them up to somewhere between 5 and 6 per cent,” Mr. D’Costa said. Then there’s the question of market timing, said Chris Whelan, senior Canada rates strategist at Toronto Dominion Bank. Many investors appear unwilling to buy bonds, despite their higher rates, until there’s a better sense that yields aren’t moving higher. That assurance can only be provided by weaker economic data, which would reinforce the case that the Fed and the Bank of Canada are done hiking interest rates.

Business Business Latest News, Business Business Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Premarket: Global stocks slip as rising U.S. bond yields spook investorsU.S. dollar holds near recent highs as Fed officials suggest rates won’t be coming down any time soon
Source: globeandmail - 🏆 5. / 92 Read more »

Stocks sink as bond yields surge: Stock market news todayThe Nasdaq led losses as rising Treasury yields piled on pressure and investors got a reminder not to expect a Fed rate cut any time soon.
Source: YahooFinanceCA - 🏆 47. / 63 Read more »

Stocks slip as surging U.S. bond yields fuel investor angstKitco News collects and features the top financial, economic and geopolitical news from around the world. Kitco's aggregated sources include some of the top newswires in the world including the Association Press, Canadian Press, Japanese Economic Newswire, and United Press International.
Source: KitcoNewsNOW - 🏆 13. / 78 Read more »

Stock market today: Unrelenting rise in Treasury yields drags Wall Street lowerWall Street is sinking again under the weight of higher yields in the bond market.
Source: CTVNews - 🏆 1. / 99 Read more »