Thursday, 18 July 2024
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After a government shutdown is averted, bond yields increase

  • After a government shutdown, stock futures fell and bond yields increased.
  • The unexpected votes to continue funding federal operations through mid-November prevented a partial shutdown.
  • On Monday, benchmark Treasury rates returned to around 4.6%, which is close to 16-year highs.

After Republicans and Democrats put their stark philosophical differences aside over the weekend to prevent a government shutdown, stock futures fell and bond yields increased.

The unexpected votes to continue funding federal operations through mid-November prevented a partial shutdown that would have resulted in employee furloughs and possibly delayed paychecks.

Government shutdown

On Monday, benchmark Treasury rates returned to around 4.6%, which is close to 16-year highs. In comparison to a basket of other currencies, the dollar also increased.

The S&P 500 posted its worst monthly performance of the year in September, a nearly 5% decline, and the prospective shutdown had threatened to prolong a sluggish time for American stocks.

After the central bank released a positive survey of business optimism, the yield on benchmark Japanese government bonds rose to its highest level in a decade. The intraday trading value of the Japanese yen decreased to its lowest level in around a year.

The major market indices in Europe were down after initially rising. Bitcoin is on track to reach its best day-ending level since mid-August after trading above $28,300. Due to a holiday, Chinese marketplaces were closed.

The 10-year Treasury yield increased to 4.64%, while the US S&P 500 and Nasdaq 100 index futures declined. Interest rates are now again under the spotlight, especially when inflation is threatened by rising oil costs.

Oil futures increased little, building on the 30% gain from the previous quarter, as traders wagered that global demand will continue to outpace supply. European stocks plummeted by over 5%.

Powell and Patrick Harker, the president of the Philadelphia Federal Reserve, will participate in a roundtable discussion, while John Williams, the head of the New York Fed, suggested on Friday that interest rates should remain high for a while. As traders increase their bets on the Fed raising interest rates in November, the selloff in international bonds has accelerated.

As bond yields rose, the dollar edged up against its peers in the Group of 10, and gold prices fell to their lowest levels in seven months.

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