'The bond market is still king': Rising yields sap stocks again and boost dollar

The roughly $25 trillion Treasury sector remained in firm control of much of the financial market on Thursday as long-dated yields headed toward 5% again, taking the steam out of equities and helping the greenback recoup this week’s earlier losses.

“The bond market is still king,” Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, said via phone on Thursday. The post-CPI broad-based selloff in Treasurys “is helping the dollar recoup some losses seen earlier this week and weighing on the stock market after a four-day rally.”

Since the Fed’s Sept. 20 policy decision, which reiterated a higher-for-longer theme in interest rates, 10- BX:TMUBMUSD10Y and 30-year Treasury yields BX:TMUBMUSD30Y respectively jumped by 43.7 basis points and 54.3 basis points through last Friday. Then, with the bond market closed on Monday for Columbus Day and Indigenous Peoples Day, both rates dived by a total of around 20 basis points each on Tuesday and Wednesday, before turning higher once again on Thursday.

As of Thursday afternoon, 6-month through 30-year Treasury yields were all broadly higher, with 10- and 30-year yields in the process of reversing all or most of their declines seen on Wednesday. A weak $20 billion auction of 30-year bonds only exacerbated Thursday’s government-debt selloff. Minutes of the Fed’s Sept. 19-20 meeting, released on Wednesday, showed that most policy makers judged that one more rate increase would likely be appropriate at a future meeting, even though they saw a need to proceed carefully.

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