Yield on 10-year U.S. Treasury note jumps after Fed chairman eyes quicker interest-rate rises if needed
U.S. stock futures gained and government bond yields jumped as investors digested Federal Reserve Chairman Jerome Powell’s more aggressive tone on reining in inflation.
Futures for the S&P 500 and Dow Jones Industrial Average advanced 0.3% and 0.4%, respectively, on Tuesday.Contracts for the tech-focused Nasdaq-100 rose 0.2%. Major U.S. stock indexes ended lower Monday after Mr. Powell said the Fed was prepared to raise interest rates in half-percentage-point steps if needed to tamp down inflation.
VIX and VIXmain fell 1.32% and 2.67% separately.
The price of gold fell 0.05% to around $1,928.6 a troy ounce.
In the U.S. government bond market, the yield on the 10-year U.S. Treasury note jumped to 2.359%, from 2.315% Monday, extending its sharp climb higher. The yield on the benchmark Treasury note is now hovering at its highest level since May 2019, before the Covid-19 pandemic upended financial markets. Yields rise when bond prices decline.
Stocks, bonds, commodities and currencies have continued to swing dramatically, as investors weigh the economic impact of Russia’s war in Ukraine at a time when inflation is already at its highest level in decades. Many investors now fear that the war, and particularly higher oil prices, could keep inflation sustained and stunt economic growth in the U.S. and Europe, as elevated energy prices eat away at household spending.
Last week,the Fed proceeded with plans to raise lift interest rates from near zero.The central bank last week also penciled in six more increases by the end of the year,which would mark the most aggressive pace in more than 15 years.
Money managers took the news from the Fed in stride. Last week, all three major U.S. stock indexes recorded their largest one-week percentage gain since November 2020, even as Russia continued its attack on Ukraine.
This week, however, Mr. Powell’s tougher tone has rattled some investors, sending stocks lower Monday and bond yields sharply higher. The two-year Treasury yield—which is especially sensitive to changes in monetary policy—climbed to 2.195% Tuesday, from 2.132% Monday. Many investors are keeping a close watch on the so-called yield curve, which measures the spread between short- and long-term rates and is often seen as a strong indicator of sentiment about the prospects for economic growth.
In the energy markets, futures for Brent crude, the international benchmark, fell 0.6% to $114.89 a barrel, paring gains reached earlier in the day. Last week, Brent prices fell below $100 before reversing and climbing higher.Support for a European Union-wide ban on the purchase of Russian oil is growing inside the bloc, raising the possibility of more volatility ahead.
In Europe, the pan-continental Stoxx Europe 600 increased 0.5%, putting it on pace to rise for a fifth consecutive session.
In Asia, major indexes also largely ended higher. Hong Kong’s Hang Seng gained about 3.2%, while Japan’s Nikkei 225 rose 1.5%. China’s Shanghai Composite advanced 0.2%.
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