Bond yields climbed as OPEC+’s surprise plan to cut oil production rekindled inflation concerns, spurring bigger bets on a quarter-point Federal Reserve rate hike in May.
(Bloomberg) — Bond yields climbed as OPEC+’s surprise plan to cut oil production rekindled inflation concerns, spurring bigger bets on a quarter-point Federal Reserve rate hike in May.
Treasuries fell across the curve, with the policy-sensitive two-year yield jumping as much as 11 basis points before trimming the advance. The tech-heavy Nasdaq 100 underperformed major stock benchmarks. Energy shares joined a rally in US crude to around $80 a barrel.
“The impact of this will feed into inflation data globally and means that inflation may take longer to return to target,” said Mark Dowding, the chief investment officer at BlueBay Asset Management. “This will mean that interest rates, once they peak, will need to stay at higher levels for longer.”
Monday’s market moves presented a contrast to the view that lifted assets at the end of the first quarter, when Treasuries and stocks rallied on expectations the banking turmoil would encourage the Fed to pause rate hikes and opt for a cut later this year. Money markets raised the probability of a quarter-point interest-rate hike in May to 65% from 55%.
Fed Bank of St. Louis President James Bullard told Bloomberg Television Monday that it was not clear what higher oil prices will mean for US monetary policy, although the decision to cut output was unexpected.
Haven currencies failed to catch a bid. The dollar fluctuated while the Japanese yen weakened as data showed confidence among the nation’s large manufacturers has worsened, adding to the case for the central bank to maintain ultra-easy monetary settings a while longer.
Key events this week:
- Eurozone PPI, Tuesday
- US factory orders, US durable goods, Tuesday
- Australia rate decision, Tuesday
- Cleveland Fed President Loretta Mester speaks, Tuesday
- Eurozone S&P Global Eurozone Services PMI, Wednesday
- US trade, Wednesday
- UBS annual general meeting, Wednesday
- US initial jobless claims, Thursday
- St. Louis Fed President James Bullard speaks, Thursday
- US unemployment, nonfarm payrolls, Friday
- Good Friday. US stock markets closed, bond markets close for part of the day
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.1% as of 9:30 a.m. New York time
- The Nasdaq 100 fell 0.7%
- The Dow Jones Industrial Average rose 0.4%
- The Stoxx Europe 600 was little changed
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.3% to $1.0875
- The British pound rose 0.4% to $1.2386
- The Japanese yen fell 0.1% to 133.01 per dollar
Cryptocurrencies
- Bitcoin rose 0.5% to $28,221.08
- Ether rose 1% to $1,807.96
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.49%
- Germany’s 10-year yield advanced two basis points to 2.31%
- Britain’s 10-year yield advanced one basis point to 3.50%
Commodities
- West Texas Intermediate crude rose 5.7% to $79.99 a barrel
- Gold futures rose 0.4% to $1,994.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Srinivasan Sivabalan.
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