Treasury yields surged after data showing US economic strength bolstered speculation the Federal Reserve will have room to raise interest rates twice more this year.
(Bloomberg) — Treasury yields surged after data showing US economic strength bolstered speculation the Federal Reserve will have room to raise interest rates twice more this year.
Bonds fell across the curve, with two-year yields jumping 16 basis points to 4.87%. Swap markets indicate a 50% chance of a second Fed hike by year-end. The dollar erased losses. The S&P 500 fluctuated, with the stock market set for more instability as traders adjust their positions at the end of the quarter.
US jobless claims fell by the most since October 2021 in a week that included the Juneteenth holiday. Gross domestic product was revised up notably to a 2% annualized advance in the first quarter, separate data showed. Meanwhile, key gauges of inflation watched closely by the Fed were revised down slightly.
“The market is processing the recent strength in the economic data in both positive and negative ways, as solid economic data means that the economy is more resilient, but it also emboldens the Federal Reserve to keep raising interest rates,” said Carol Schleif, chief investment officer at BMO Family Office.
Fed Bank of Atlanta President Raphael Bostic said he favors keeping borrowing costs on hold, but that Chair Jerome Powell and other colleagues don’t agree with him. Powell is signaling keenness to lift rates, having told a conference in Madrid just hours earlier that acting at consecutive policy meetings isn’t “off the table.”
In corporate news, Bank of America Corp. and Wells Fargo & Co. paced gains in financial companies as the biggest US lenders passed the Fed’s stress test, clearing the way for payouts. Netflix Inc. climbed as Citigroup Inc. raised its price target.
Key events this week:
- China manufacturing PMI, non-manufacturing PMI, balance of payments, Friday
- US personal income and spending, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 9:31 a.m. New York time
- The Nasdaq 100 was little changed
- The Dow Jones Industrial Average was little changed
- The Stoxx Europe 600 was little changed
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.4% to $1.0873
- The British pound fell 0.3% to $1.2603
- The Japanese yen fell 0.2% to 144.79 per dollar
Cryptocurrencies
- Bitcoin rose 2% to $30,701.65
- Ether rose 2% to $1,867.35
Bonds
- The yield on 10-year Treasuries advanced 12 basis points to 3.83%
- Germany’s 10-year yield advanced eight basis points to 2.39%
- Britain’s 10-year yield advanced six basis points to 4.38%
Commodities
- West Texas Intermediate crude fell 0.1% to $69.48 a barrel
- Gold futures fell 1.1% to $1,901.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller, Sujata Rao, John Viljoen, Peyton Forte and Carly Wanna.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.