Treasuries deepened a selloff, driving the 10-year yield to a nine-month high, and equities slumped as investors grew increasingly worried about rising borrowing costs.
(Bloomberg) — Treasuries deepened a selloff, driving the 10-year yield to a nine-month high, and equities slumped as investors grew increasingly worried about rising borrowing costs.
The S&P 500 extended Wednesday’s losses and European stocks fell 0.9%. The dollar strengthened for a fourth day. Bill Ackman, founder and chief executive officer of Pershing Square Capital Management, added to the bearish mood by announcing he’s shorting 30-year Treasuries as a hedge on the impact of higher long-term rates on stocks.
The rapid rise in Treasury yields over the past four days has “cast a shadow” across risk assets and investors will be focused on the bond market until the US releases its quarterly financing report next week, wrote strategists at ING Groep NV. Jobless claims numbers out Thursday underscored resilient demand for workers and the strength of the American economy, with a reading on the services industry still to come. Apple Inc. and Amazon.com Inc. are due to report later in the day.
“Given the recent rally in US stocks, especially in the Nasdaq, there’s a lot of sensitivity to rising yields,” said Gerry Fowler, head of European equity strategy and global derivative strategy at UBS Group AG. “In Europe, a lackluster earnings season is also weighing on the outlook. So many are taking the opportunity to implement a more bearish positioning.”
The bond selling has come on the heels of robust US economic data and news that the Treasury will issue $103 billion of securities next week, slightly more than forecast. The decision by Fitch Ratings to strip the US of its AAA credit ranking has also put a spotlight on the country’s booming fiscal deficits.
Long-term debt looks “overbought” from a supply and demand perspective and it’s hard to see how the market will cope with the increased issuance “without materially higher rates,” Ackman said in a post on X, the platform formerly known as Twitter.
Warren Buffett, on the other hand, told CNBC the Fitch move doesn’t change what Berkshire Hathaway Inc. is doing at the moment.
“Berkshire bought $10 billion in US Treasurys last Monday. We bought $10 billion in Treasurys this Monday. And the only question for next Monday is whether we will buy $10 billion in 3-month or 6-month” T-bills, CNBC cited Buffett as saying.
The pound was weaker against the dollar after the Bank of England increased its key interest rate by 25 basis points, as expected. Traders pared bets on where UK rates will end up, seeing a peak below 5.75%.
Read more: BOE Lifts Rates to 5.25%, With Warning Policy to Stay Tight
Corporate Highlights:
- Tesla Inc.’s China deliveries slumped in July to the lowest level this year, as the electric vehicle maker struggles to attract buyers despite price cuts and other incentives.
- Qualcomm Inc., the largest maker of smartphone processors, gave a tepid sales forecast for the current quarter, indicating that demand for mobile devices remains weak.
- Moderna Inc. raised its Covid-19 vaccine sales outlook for the year, finalizing contracts with Japan and several American health-care companies as the US government largely stops paying for the shots.
- DoorDash Inc. reported a record number of delivery orders in the second quarter, showing consumers’ commitment to takeout despite rising prices.
- PayPal Holdings Inc. said a key measure of profits shrank in the second quarter as the company had to set aside more money to cover souring loans it has made to merchants.
Key events this week:
- Eurozone retail sales, Friday
- US unemployment rate, non-farm payrolls, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.4% as of 9:30 a.m. New York time
- The Nasdaq 100 fell 0.5%
- The Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 fell 0.9%
- The MSCI World index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.0929
- The British pound fell 0.4% to $1.2661
- The Japanese yen rose 0.4% to 142.71 per dollar
Cryptocurrencies
- Bitcoin was little changed at $29,132.69
- Ether fell 0.3% to $1,835.79
Bonds
- The yield on 10-year Treasuries advanced 10 basis points to 4.17%
- Germany’s 10-year yield advanced five basis points to 2.59%
- Britain’s 10-year yield advanced six basis points to 4.46%
Commodities
- West Texas Intermediate crude rose 0.5% to $79.92 a barrel
- Gold futures fell 0.3% to $1,968.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.