Surging Treasury yields can lead to market fracture. Just ask the U.K.

  • 📰 MarketWatch
  • ⏱ Reading Time:
  • 46 sec. here
  • 2 min. at publisher
  • 📊 Quality Score:
  • News: 22%
  • Publisher: 97%

United States News News

United States United States Latest News,United States United States Headlines

Political turmoil, budget problems and over-levered positioning can lead to a frenzy of bond selling, just as the U.K. discovered a year ago.

Political dysfunction. Government bond yields spiking. A market so thoroughly rattled it required the central bank to intervene.Some observers are worried that it might, after Treasury yields midweek surged to fresh multi-year highs amid further evidence of a sturdy economy that may encourage the Federal Reserve to raise interest rates further.

“I struggle to see how the recent yield moves don’t increase the risk of an accident somewhere in the financial system given the relatively abrupt end over recent quarters of a near decade and a half where the authorities did everything they could to control yields… risky times,” said Jim Reid, strategist at Deutsche Bank.

Bond investors, seeing the need for more debt to fund the tax cuts, and the likelihood that any resulting consumer spending boost might force the central bank to raise interest rates further, started selling, forcing yields sharply higher. There are similarities between the U.K’s 2022 scenario and the U.S. now. Political fracture is an obvious one. Liz Truss was the fourth U.K. Prime Minister in six years as the Conservative Party tore itself apart over Brexit. The removal of McCarthy comes ahead of what is expected to be a very divisive U.S. 2024 presidential election.

We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 3. in US
 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.

United States United States Latest News, United States United States Headlines

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

Stock market likely to correct if 10-year Treasury yield reaches 5%, RBC saysThe 10-year Treasury yield's recent push above 4.3% is aborting an upswing for stocks that began year ago, says Robert Sluymer, technical strategist at RBC...
Source: MarketWatch - 🏆 3. / 97 Read more »