US government debt under renewed pressure after worst quarter ever

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US government debt came under new selling pressure on Friday after its worst quarter for government bonds on record, as investors looked ahead to central banks tightening monetary policy to curb rising inflation.

The yield on the 10-year US Treasury, which moves inversely in price and supports global borrowing costs, rose 0.12 percentage points to 2.445 percent.

The yield on the two-year bond rose 0.16 percentage points to 2.448 percent, surpassing the 10-year bond for the first time since August 2019.

Such inversions of the US yield curve are usually seen as a sign that the economy is at risk of a recession. Emmanuel Cau, European equity strategist at Barclays, said the inversion is “something to watch, but a late 2023/early 2024 recession is more likely than imminent”.

A Bloomberg index of total government bond yields fell by a record 5.6 percent in the first three months of the year.

Ewout van Schaick, head of multi-asset at NN Investment Partners, said Friday’s sell-off was the “continuation of last quarter’s trend” as investors pulled out of US Treasuries amid fears the Federal Reserve could slow economic growth. temper by raising interest rates to curb inflation.

A new set of labor market data on Friday showed the US posted another month of job growth in March, with 431,000 jobs. That figure had been compared to a Reuters forecast of 490,000 and was down from the revised figure of 750,000 in February.

“The Fed will have to [raise rates by] 50 basis points, this is a hot market,” said Steven Blitz, chief US economist at TS Lombard. “You can’t add so many jobs in a month and think a recession is coming.”

At the same time, average hourly wages rose 0.4 percent month-over-month, compared to a revised 0.1 percent gain in February, bringing the annual average earnings increase for March to 5.6 percent. The unemployment rate in the US fell from 3.8 percent to 3.6 percent, broadly in line with a Reuters forecast of 3.7 percent.

In stock markets, US and European equities rose after closing their worst quarter in two years. Wall Street’s benchmark S&P 500 and tech-heavy Nasdaq Composite both added 0.2 percent, after falling 4.9 percent and 9.1 percent respectively in the first three months of 2022.

In Europe, the regional Stoxx 600 index, which fell nearly 7 percent in the first quarter, added 0.6 percent. Germany’s Dax added 0.6 percent and London’s FTSE 100 rose 0.4 percent.

Oil prices were more stable after falling on Thursday, when the White House announced a “historic release” of its emergency reserves — pledging to increase supplies by about 1 million barrels a day over the next six months in a bid to bring prices down. to cool that have risen since Russian President Vladimir Putin launched his invasion of Ukraine.

Brent oil, the international benchmark, added 0.2 percent to $105 a barrel. The US marker West Texas Intermediate fell 0.4 percent and traded at $99.9.

Asian stocks fell lower early in trading before cutting losses, with Hong Kong’s Hang Seng index closing 0.2 percent higher and Japan’s Topix lower 0.1 percent.

The Hang Seng Tech Index, which tracks Hong Kong-listed Chinese technology companies, fell 0.7 percent after closing 1.4 percent lower on Thursday.

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