US debt that’s the most responsive to changes in Federal Reserve policy is leading the fallout from this week’s shock inflation print. Five-year Treasury yields jumped 20 basis points this week to 1.26 per cent as of 4.36 pm (IST), set for the biggest surge in two years, as traders consider the potential for the Fed to raise interest rates earlier than markets currently anticipate.
Yields on similar-maturity debt by Italy led euro-area moves, climbing as much as five basis points before pulling back. Global bonds have had a wild month, with yields gyrating as investors reassessed their expectations for the path of rate hikes as inflation quickens.
The Treasury market has seen unusually large price swings as liquidity dried up, by one measure to the worst since peak investor pandemic fears in March 2020. “Investors and Fed policy makers are still unsure as to whether elevated inflation will be transitory or not,” said Kenta Inoue, a senior market economist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.