U.S. government bonds have met and Wall Street stock markets are poised to hit other record highs as investors drift away from the Federal Reserve’s expectation to quickly curb its pandemic-era support for financial markets.
The yield on the 10-year US Treasury bond, which is moving inversely to its price, fell 0.07 percentage points to 1.301 percent, touching on the fresh minimum of four months. The equivalent yield in the German Bund fell from 0.04 percentage points to minus 0.309 percent, its lowest since the beginning of April.
The 10-year Treasury yield approached 1.8 percent in March, as the price of debt was depressed by fear that the world’s most influential central bank would respond to a rapid U.S. economic recovery and rising inflation with a rapid round of interest rate hikes.
But nerves over the Fed moving to cool an overheating economy have been ruled out by forecasts that U.S. GDP growth, which is projected to have reached an annualized pace of at least 9 percent in the second quarter of 2021, it is on track to emerge.
“Bond markets express a vision that we are approaching the slowdown phase of the economic cycle,” said Gergely Majoros, portfolio director at Carmignac.
Majoros added that markets fear that the Fed will “gradually normalize” monetary policy, while nerves over inflation have been calmed by US President Joe Biden cut the price on its infrastructure stimulus spending package offered more than half at $ 1tn.
In the stock markets, the S&P 500 stock index rose 0.2 percent and the technology-focused Nasdaq Composite picked up the same amount in early trading. Both seemed ready to touch other records. The Stoxx Europe 600 rose 0.6 percent.
Market movements were “consistent with a Goldilocks regime,” Goldman Sachs strategists led by Christian Mueller-Glissmann commented in a research note, referring to a scenario where the global economy was neither spent nor contracted by too much. . They warned, however, that “there is still uncertainty about the Fed’s trajectory.”
Later Wednesday, the U.S. central bank will release the minutes of its June meeting, when officials presented their projections for the first one-year post-pandemic interest rate hike to date. 2023.
These will be scrutinized by investors for signals about when the Fed plans to cut its $ 120 billion a month in pandemic-era debt purchases, even if economists don’t largely expect any formal announcement until the end of the year.
“Presumably, the bond market believes the Fed is unlikely to raise rates anywhere near the peak of the last cycle,” said Jefferies strategist Sean Darby.
Elsewhere in the markets, Brent crude fell 2.4 percent to $ 72.76 a barrel, including a 3.4 percent drop Tuesday. The oil benchmark has fallen after discussions between members of the Opec + group of producer nations finished earlier in the week without any agreement to liquidate the Covid-19 supply boards.
“If the current stand-off continues, comply with [the] the share of production will eventually deteriorate, “said Morgan Stanley analysts.” Much of Opec’s reserve capacity could reach the market quickly. “
The dollar index, which measures the green dollar against major currencies and had rebounded after the June Fed meeting, has risen 0.2 percent to its highest level since the beginning of the year. April before the minutes of the central bank. The euro fell 0.3 percent to $ 1.1785, the weakest since early April.