Tuesday, 30 January 2018

Markets fall as bond yields hit multi-year highs

Markets fell on Monday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 0.2 percent and the MSCI Asia Pacific Index fell 0.2 percent.

The US 10-year Treasury yield rose four basis points to 2.70 percent, the highest in almost four years, and the German 10-year yield jumped seven basis points to 0.69 percent, the highest in more than two years.

The sharp moves on Monday came after Dutch central bank president Klaas Knot told Dutch current affairs program Buitenhof on Sunday the European Central Bank should make it clear how it will end its asset purchases as soon as possible after the current bond buying programme ends in September.

“There is no reason whatsoever to continue the programme”, Knot said. “I feel that we need to be clear about this.”

“The forward looking return on equities has come down marginally because of the valuation issue, and at the same time, global investors are looking at bond yields which have risen, maybe making global bonds a little more attractive,” said Kevin Caron, a senior portfolio manager at Washington Crossing Advisors. “At some point you would expect to see a rotation out of one and into another.”

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