A ‘crazy day’ in the bond market reflects growing fears of recession
Government bond prices soared on Friday as weak economic data in the United States and Europe stoked concerns about slowing global growth.
Germany’s 10-year government bond yield, which moves in the opposite direction to its price, fell 0.19 percentage points to around 1.02%, its biggest one-day drop in a month. In the United States, the 10-year Treasury yield, which underpins borrowing costs around the world, fell 0.12 percentage points to around 2.75%, extending a decline of 0, 15 percentage points on Thursday.
“It was a crazy day,” said Andrew Brenner, head of international fixed income at National Alliance Securities. “Fear of a recession is growing.”
US and German government bonds are seen as safe places for investors to put their money in times of concern, driving up prices and lowering yields. Bonds also reflect investors’ expectations of the health of the economy.
Data released on Friday signaled a slowdown in business activity in the United States and Europe, adding to fears of a recession and causing a sharp decline in expectations for further interest rate hikes by the Federal Reserve.
Central banks around the world have raised interest rates to slow demand and reduce stubbornly high inflation. But concerns are growing that tighter policies could go too far, prompting central banks to end their pursuit of higher interest rates and instead turn to easing financial conditions.
Subadra Rajappa, head of US rates strategy at Societe Generale, said the moves in government bond markets had been “quite dramatic” and also confusing. “It’s been a bit of a headache,” she said.
Ms Rajappa attributed the moves to “widespread concern” spurred by weakening economic data, a surprising string of announcements from the European Central Bank on Thursday and more technical reasons that underscored the challenges of trading the most popular financial assets. safer.
Gennadiy Goldberg, rates strategist at TD Securities, said a large block trade on Thursday — a large transaction, usually done by an institutional investor — helped start the move in US Treasury debt, then points. weak data added to the momentum. Markets have been “shaky”, he said, particularly in response to bad news.
“I don’t think it was one thing – it was death by a thousand cuts for the Treasury market,” he said.
Elsewhere, stocks fell, weighed down by weak earnings reports from big tech companies like Snap and Twitter. Still, the S&P 500 ended the week up 2.5%, its best week since late June.
Oil prices gave up earlier gains, with Brent, the international benchmark, down 0.6% to $103.20 a barrel.
The US dollar slid 0.3% against a basket of currencies from its major trading partners, closing only its second weekly decline in the past eight weeks.