Government bond markets suffered a fresh spate of volatility on Friday, hitting Nasdaq futures, after president Joe Biden said the US aimed to make vaccinations available to every adult by the start of May.
The yield on 10-year US Treasuries rose above 1.6 per cent, up sharply from around 1.54 per cent on Thursday, as investors sold the debt. It now sits near the 13-month high it struck during a choppy session a week ago. Yields on the 10-year UK gilt jumped 0.06 percentage points to 0.79 per cent.
Nasdaq 100 futures fell 1.8 per cent following a drop in debt prices, suggesting the tech rally that powered US indices to record highs could be thrown off course.
The Europe-wide Stoxx 600 fell 0.3 per cent in early trading, while London’s FTSE 100 was flat and Germany’s Xetra Dax lost 0.4 per cent.
The latest jolt of market jitters came after Mr Biden said every US adult would be eligible for a coronavirus vaccination by May 1st, and touted “some real progress” in America’s fight against the coronavirus pandemic in a televised address. The US president set the July 4 th Independence Day holiday as a new target for a return to normality.
Bond markets have endured volatility in recent weeks over the prospect that a swift US economic recovery would increase inflation, which erodes the value of bond’s interest payment. The jitters in bond markets have spilled over into stocks.
On Thursday, Mr Biden signed the $1.9 trillion (€1.6 trillion) stimulus bill into law and the European Central Bank pledged to increase the pace of its bond-buying programme.
Wall of money
“There is a wall of money coming like we haven’t seen since the second world war,” said Didier Rabattu, head of equities at Lombard Odier Investment Management.
“The Nasdaq is made of growth companies, it’s a pretty volatile index. In this environment, when rates go up, investors reprice the value of growth,” said Rabattu.
Analysts pointed to a $25 billionn bond sale by Verizon as a contributing factor to the weakness in Treasuries. "The current backdrop is that many non-rates investors are waking up to their rate risk exposure and the natural way to react is to hedge that risk," said Antoine Bouvet, senior rates strategist at ING. "I think corporate deals weigh more on US Treasuries in the current environment."
In Asia, China’s CSI 300 index rose 0.4 per cent, Hong Kong’s Hang Seng fell 2.2 per cent and South Korea’s Kospi gained 1.2 per cent.
– Copyright The Financial Times Limited 2021
