Bond yields up on expected interest rate hikes
Yields were up on government bonds on Wednesday as investors continued to expect interest rates to go up in a number of economies.
In the United States, a report that many more jobs than expected were created in June increased the expectation that the Fed will hike interest rates again in August. If Department of Labor Statistics numbers on Friday bear out today’s jobs numbers from the ADP, it could move analysts to rethink last week’s sentiment that the Fed might pause in its series of rate increases at its August meeting.
At mid-session in New York, the two-year Treasury bond had gained 7.1 basis points to a yield of 5.25 percent, while ten-year issues were yielding 5.235 percent, an increase of 8 basis points.
New data from the service sector in the Eurozone supported the consensus opinion that interest rates there will rise soon. Most analysts expect that when the European Central Bank meets on Thursday it will hold interest rates at their current level, but will signal that new rate hikes will come sooner rather than later.
The two-year Schatz was up 3.9 basis points to 3.603 percent, while the ten-year Bund added 3.1 basis points to a yield of 4.130 percent.
In the UK, meanwhile, the two-year gilt added 1.9 basis points to 4.775 percent, while the ten-year gilt was yielding 4.719 percent, a gain of 3.1 basis points.
Yields on Japanese government bonds were up as expectations grew that the Bank of Japan will end zero interest rates this month . Meanwhile, the furor over the Bank of Japan’s governor and his investment interests seemed to be abating. In addition, North Korea’s missile tests did not seem to have much of an impact on bonds activity.
The five-year Japanese government bond added 3.5 basis points to 1.560 percent, while the ten-year bond was up 0.5 basis points to a yield of 1.985 percent.
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