Bond Yields Surge to Daily Peaks Amid Powell Event: Market Summary

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The US Treasury bond market experienced a significant sell-off as investors turned to Federal Reserve Chief Jerome Powell for insights into the future of interest rates. Yields on Treasury bonds with maturities ranging from five to 20 years rose 10 basis points, while the 10-year benchmark bond reached 4.68% during a roundtable discussion with Powell. This surge in bond yields reflects traders’ increased expectations of a rate hike from the Fed in November, now seeing it as a one-in-three chance, up from the 25% likelihood priced on Friday.

The selloff in global bonds gained momentum following the US government’s temporary shutdown reprieve, as traders redirected their focus back to interest rates. The S&P 500 experienced a slight increase, and the Nasdaq 100 rose by approximately 1%. However, the overall market focus quickly shifted to interest rates, particularly due to rising oil prices that pose a threat of inflation. The rising yields prompted a retreat in oil prices, with West Texas Intermediate dropping below $90 a barrel.

The US dollar also saw gains against its major currency peers, following an impressive quarter. Additionally, gold prices slipped to seven-month lows due to the pressure imposed by surging bond yields. Amidst these monetary market fluctuations, key events to watch this week include China’s week-long holiday, a discussion on climate risk moderated by New York Fed President John Williams, and the US nonfarm payrolls report for September.

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