The cost of government borrowing is rising amid turmoil in global bond markets
The turbulence in the global bond markets yesterday caused the cost of government borrowing to rise worldwide.
Investors feared the prospect that interest rates would remain high for much longer, sending 10-year Treasury yields near their highest level since 2007.
That added pressure to U.S. stock markets, with the Dow Jones and S&P 500 each falling more than 1 percent and the tech-heavy Nasdaq losing around 2 percent.
In the UK, 30-year government bond yields continued to rise, approaching levels last seen in the wake of Liz Truss’ mini-Budget last year.
Short-term British bond yields also rose and the FTSE 100 fell 0.5 percent.
The prospect that interest rates will remain high for longer has left 10-year Treasury yields near their highest level since 2007.
It was similar in Europe, where there was a sell-off in German bonds.
However, the main action took place in the USA, triggered by unexpectedly high job vacancy numbers in the world’s largest economy.
The job vacancies and labor turnover survey (Jolts) added to fears that the Federal Reserve could seek another interest rate hike next month after putting them on hold last time.
With increasing signs of economic weakness, UK interest rates are expected to be less likely to rise again. This inequality sent the pound plummeting, falling below $1.21 to hit its lowest level in almost seven months yesterday.
Attention will be even more focused on the US jobs figures, which are due to be released later this week.
Quincy Krosby of broker LPL Financial said: “Friday’s payroll data should help clarify whether the labor market is as strong as the Jolts report suggests, because in this period of the Fed’s ‘last mile’, the Untangling remaining “sticky” inflation will be a stronger “An unexpected than expected report will be the last thing the Fed wants to see, let alone financial markets.”