US bond yields fall from 14-month highs and oil stabilizes

LONDON (Reuters) – US bond yields fell 14-month highs on Friday, as markets expected a US economic recovery, while oil stabilized after falling 7%.

Bond markets have experienced strong moves this week as the U.S. Federal Reserve said it expected higher economic growth and inflation in the U.S. this year, though it reiterated its commitment to maintaining the rate of target interest close to zero.

Yields on ten-year U.S. banknotes, which are moving inversely to price and have risen over the past seven weeks relative to growth expectations, rose to their highest level since January 2020, at 1.754% on Thursday. They were last at 1.6838%.

The yields of long-standing German government bonds fell in parallel with the yields of the United States.

“Every man and his dog are looking at bond yields,” said Giles Coghlan, chief currency analyst at HYCM. “Even though (Fed Chairman Jerome) Powell was obscure, bond yields marched higher, just in anticipation that the Fed was behind the curve: the market is raising rates.”

MSCI global stocks fell 0.21% from a month-long high in the previous session, although Nasdaq futures rose 0.8% and S&P 500 futures gained 0.4% .

Oil stocks and the United States were hit on Thursday by concerns about vaccine faltering and the slowdown in Europe, after France imposed a one-month shutdown in Paris and parts of the north.

French shares fell 0.5%. UK stocks fell 0.7%, while energy prices fell.

After falling 7% on Thursday, Brent crude futures bounced 82 cents to $ 64.09 a barrel. U.S. crude rose 88 cents to $ 60.88.

The oil withdrawal ended with four weeks of gains in a single session, amid concerns that global demand would fall short of high expectations.

The jump in Treasury yields has provided some support for the US dollar.

“Most market participants consider the Fed’s cautious approach justified and assume that this supports the economic recovery,” Commerzbank analysts said in a note.

“This improves the long-term economic outlook and therefore justifies higher long-term interest rates and a stronger dollar.”

However, the dollar changed little on Friday, although it declined 0.1% to 91,735 against a basket of currencies and held firm against the euro at $ 1.1922. It fell 0.2% on the low-yielding yen to 108.63.

Markets were also troubled by the Bank of Japan’s (BOJ) decision to slightly expand the target band for ten-year returns and adjust its asset purchase.

The bank portrayed the changes as an “agile” way to make relaxation more sustainable, even though investors seemed to do so as a step backwards from total stimulus. The decision to limit purchases to TOPIX-linked ETFs only dropped the Nikkei by 1.6%.

South Korea lost 1%. Chinese chips fell 1.9%, perhaps disturbed by an exchange of fire between Chinese and American diplomats in the first face-to-face conversations of the Biden era.

Rising bond yields have weighed on gold, which offers no fixed yield, leaving it down 0.4% at $ 1,743 an ounce.