Sovereign Bond Updates

Global bond markets came under selling pressure on Friday after data showed the United States had created more jobs than expected, prompting investors to hope that the Federal Reserve would ease its stimulus package in times of crisis. crisis as the economy recovered.

As optimism grew, investors reassessed the trajectory of US interest rates, pushing the yield, which moves inversely to price, on the 10-year Treasury bill by 0.08 percentage point to 1 ,30 %. The prices of government bonds in the UK and mainland Europe also fell. The benchmark S&P 500 stock index hit a new all-time high, extending its gains for the week.

The report showed that the United States created nearly a million jobs in July, ahead of analysts’ forecasts. The unemployment rate fell 0.5 percentage points to 5.4% for the month through July, showing substantial progress but still well above the levels reached in late 2019 before the pandemic.

The jobs report is the latest before the global central bankers summit in Jackson Hole, Wyoming, at the end of the month. The good jobs numbers will intensify the debate over when the Fed starts to curb its ultra-supportive policies as the economic recovery from Covid-19 gathers pace.

The world’s largest central bank has kept U.S. interest rates at historically low levels and bought $ 120 billion in assets each month throughout the health emergency.

“Today’s Outstanding Payroll Report Highlights a Dramatic Labor Market Recovery and Increases the Chances of the Fed Reducing Asset Purchases Sooner Possible,” said Mike Bell, strategist at JPMorgan Asset Management.

“Hiring strength calls into question the T-bill rally that has taken place in recent months and we expect this to be the start of a sustained rise in T-bill yields on the rest of the year, ”he added.

However, for other analysts, the increase in job growth does not justify substantial action by the Federal Reserve.

“The July payroll report was a very good surprise on the upside, but also not strong enough to bring forward the expected date for the Fed’s gradual take-off – just what the market needs,” said Seema Shah , strategist at Principal Global. Investors, in a note.

“As many labor supply constraints disappear over the next month, labor demand should be given the green light to increase, and September will hopefully bring another big figure. “

The blue-chip S&P 500 index closed 0.2% higher, extending the all-time high of the benchmark set Thursday, while the tech-focused Nasdaq, more sensitive to rising rates. interest, fell 0.4%. Goldman Sachs analysts said this week they expected the S&P 500 to gain another 7% by the end of 2021, in addition to the 17% rise recorded so far.

The dollar appreciated, trading 0.6% against a basket of currencies.

The European benchmark Stoxx 600 has traded in a narrow range, leaving it on track for its best week in five months after repeatedly setting new records this week.

The UK’s FTSE 100 closed slightly higher, with investors encouraged by more hawkish comments from the Bank of England on Thursday. The yield on two-year gilts reached as much as 0.15% during the day, around April 2020 levels that were also briefly hit last month, after the UK central bank said it there would be a “modest tightening” of its interest rate policy. to control inflation.

Asian markets were put on hold after a turbulent week, as investors analyzed statements by the ruling party in China to try to determine which sectors could be targeted next as Beijing seeks to assert greater control over parts economy. Tech stocks, tutoring and games have all been hit in recent weeks. Hong Kong’s Hang Seng Index drifted on Friday while China’s CSI 300 fell 0.6%.

Elsewhere, Brent crude fell 1.1% to $ 70.51 per barrel, ending a volatile week where prices fell more than 7% on fears that the Delta variant would spread and new travel restrictions. do not dampen demand.

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Robert Armstrong dissects the most important market trends and explains how the best minds on Wall Street are reacting to them. Sign up here to receive the newsletter directly to your inbox every day of the week


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