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Global Markets: U.S. yields at 10-month high on report China may slow U.S. bond purchases

Reuters  |  NEW YORK 

By Caroline Valetkevitch

NEW YORK (Reuters) - Major yields hit multi-month highs and world stock indexes fell on Wednesday following a report that Chinese officials have recommended slowing or halting purchases of U. S. bonds.

The yield on 10-year hit a 10-month high, while the dollar slumped against a basket of currencies following the report.

The Chinese officials, who were not named, said the market for U. S. bonds is becoming less attractive relative to other assets, according to the report. They also cited trade tensions with the as a reason to slow Treasury purchases, the report said.

"It's pretty significant. That takes an out of the market at the same time you're taking the most out of the market - the U.

S. Fed," said Bruce Bittles, chief investment strategists at in Sarasota,

"It's upsetting the supply and demand balance if the report is true. Who's going to replace the demand side?"

Benchmark 10-year notes last fell 10/32 in price to yield 2.5825 percent, from 2.546 percent late on Tuesday. It earlier rose to 2.597 percent, the highest since March 15.

is the largest foreign holder of U. S. debt, with $1.19 trillion in Treasuries as of October 2017, data from the Treasury Department show.

Germany's 10-year yield hit its highest level since the October meeting when policymakers first announced the extension of its bond-buying scheme, with one citing heavy supply as the latest trigger for the move.

A combination of factors has pushed yields higher in recent weeks, with growth and prices leading investors to speculate that the world's major central banks might withdraw from their stimulus program sooner rather than later.

Some investors saw a reduction of purchases by the this week as a potential indication of this.

Analysts also said the rise in yields across the board is fuelling speculation as to whether this is the start of a sustained bear market for bonds.

The Dow Jones Industrial Average fell 52.2 points, or 0.21 percent, to 25,333.6, the 500 lost 6.67 points, or 0.24 percent, to 2,744.62 and the dropped 32.02 points, or 0.45 percent, to 7,131.56.

U. S. stocks have had a strong start to the year, with the and the Nasdaq having closed at record highs on every single day in 2018, buoyed by optimism over economic growth and expectations of a strong quarterly earnings.

The pan-European index lost 0.46 percent and MSCI's gauge of stocks across the globe shed 0.11 percent.

The dollar index had its biggest single-day drop against the Japanese yen in nearly eight months.

The dollar index fell 0.48 percent, with the euro up 0.48 percent to $1.1992.

The Japanese yen strengthened 1.15 percent versus the greenback at 111.40 per dollar.

hit new multi-year highs as OPEC-led production cuts and healthy demand helped to balance the market.

U. S. crude rose 0.64 percent to $63.36 per barrel and Brent was last at $69.00, up 0.26 percent.

For Reuters' Live blog on European and UK stock markets, open a window on Eikon by pressing F9 and type in 'Live Markets' in the

(Additional reporting by Ritvik Carvalho, Abhinav Ramnarayan, Tommy Wilkes, and in LONDON, and Sinead Carew and Karen Brettell in New York; Editing by and Nick Zieminski)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, January 10 2018. 21:11 IST