(Bloomberg) — Bonds from Australia to Japan are falling as investors mull prospects of slower US interest-rate cuts, a trend that risks upending debt positions everywhere.
Most Read from Bloomberg
Yields on Australian debt due in a decade jumped as much as 10 basis points, echoing Monday’s selloff in Treasuries. New Zealand’s 10-year yields climbed as much as seven basis points, while those in Japan rose two basis points to 0.975% — near a two-month high.
At the heart of the global debt selloff is investor soul searching around Federal Reserve rate-cut expectations and whether once again they appear overdone. A robust US economy, firming odds of a Donald Trump election victory and cautious comments from Fed officials on the pace of monetary easing muddies the prospects of gains for bond traders everywhere.
What Bloomberg Strategists say…
“Treasuries may struggle in the coming months, with a strong upward bias for yields as the US economy stays resilient and supply concerns grow”
Garfield Reynolds, Markets Live strategist
“Even in those markets where sentiment is extremely dovish, we are seeing yields sell off,” said Prashant Newnaha, senior rates strategist at TD Securities in Singapore, referring to New Zealand’s bonds as an example. There is “a possibility that the Fed could be on hold for the next six months, which is not something that the markets have really priced in,” he said.
Overnight-indexed swaps suggest a 25-basis-point rate cut next month is no longer certain. Apollo Management is among those seeing the Fed potentially keeping rates unchanged at the next meeting, while others such as T. Rowe Price see US 10-year yields climbing to 5% next year on risks of shallower rate cuts and as growth improves.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.