Worries about a possible policy tweak by the Bank of Japan threw a wet blanket on a stretched U.S. stock-market rally Thursday, with the Dow Jones Industrial Average snapping its longest winning streak since 1987 after the 10-year Treasury yield surged back above the 4% level.
That dynamic explains the knee-jerk reaction that saw the 10-year U.S. Treasury yield TMUBMUSD10Y, 4.004% surge more than 16 basis points to end above 4%, he said. Yields rise as debt prices fall. Nikkei said a possible tweak would allow gradual increases in the yield above 0.5%, but would clamp down on any sudden spikes, allowing the BOJ to rein in fluctuations driven by speculators.
Yen rallies The yield on the 10-year JGB has traded above 0.4%, but remained below the 0.5% cap. Continued interest rate rises by the Federal Reserve and other major central banks in the past year have raised worries that the 10-year JGB yield could test the limit, Nikkei reported. Those rate hikes, meanwhile, have added pressure to the yen, whose weakness is seen contributing to inflation pressures.
Japanese stocks have solidly outpaced strong gains for U.S. equities in 2023, with the Nikkei 225 NIK, +0.68% up 26% so far this year versus an 18.7% rise for the S&P 500.What’s next Investors are waiting to see what the Bank of Japan actually has to say.
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