{"id":49995,"date":"2023-08-18T07:00:15","date_gmt":"2023-08-18T11:00:15","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/commodities\/marketmind-bonds-find-respite-but-china-crisis-festers\/"},"modified":"2023-08-18T07:00:17","modified_gmt":"2023-08-18T11:00:17","slug":"marketmind-bonds-find-respite-but-china-crisis-festers","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=49995","title":{"rendered":"Marketmind: Bonds find respite but China crisis festers"},"content":{"rendered":"
\n

A look at the day ahead in U.S. and global markets from Mike Dolan <\/p>\n

A rekindled bond market fire storm and simmering China property crisis have dragged world stocks to two-month lows, but the sell-off in Treasuries appeared to ease somewhat on Friday and more credit easing is now expected from Beijing next week.<\/p>\n

Perhaps in a circular logic, the jolt to the financial system from a potential Chinese demand shock and a surge in benchmark long-term borrowing rates to their highest in more than a decade is seeing some demand for bonds returning at these yields. <\/p>\n

Investors certainly seemed to be buying into the latest rout, with Bank of America (NYSE:) reporting that Treasury funds saw “strong” inflows of $3.9 billion in the latest week, the 27th straight week of inflows and on course for a record inflow year.<\/p>\n

But the swingeing losses in what are seen as ‘safe assets’ and how that infects borrowing more widely is unnerving for many, with 30-year U.S. fixed mortgage rates hitting their highest in more than 21 years this week at 7.09%.<\/p>\n

The price hit is bruising. Exchange-traded funds invested in Treasury debt of more than a year’s maturity hit their lowest for the year this week, down 2.3% since mid-year and off more than 5% from the 2023 high in early April. Junk bond indices have fallen to their lowest in a month.<\/p>\n

Yields backed off somewhat on Friday – with those on the 30-year bond falling back almost 10 basis point from the 12-year high near 4.43% hit yesterday and 10-year real yields ebbing by the same amount from 14-year highs near 2%.<\/p>\n

With the Federal Reserve’s annual Jackson Hole conference next week now in focus, there was little respite on Thursday from the week’s red-hot economic soundings and both labour market updates and the Philadelphia Fed’s latest business survey showed brisk activity continued into August.<\/p>\n

But equally there was little let-up in the bad news from China’s ailing economy and real estate sector. Embattled developer China Evergrande <\/span><\/span> (HK:) filed for bankruptcy protection in a U.S. court on Thursday as part of one of the world’s biggest debt restructuring exercises – as fears of property market contagion abounded.<\/p>\n

China’s securities regulator said on Friday it would cut trading costs, support share buybacks and introduce long-term capital as it unveiled a package of measures aimed at reviving the stock market and boosting investor confidence.<\/p>\n

Shanghai stocks fell 1% and Hong Kong lost another 2% on Friday and the weakened again despite Thursday’s attempt by the People’s Bank of China to marshal support for the currency via state banks.<\/p>\n

Other Asian bourses and European stocks fell too, with U.S. stock futures also in the red before the open. Emerging market equity indices teetered near two-month lows too.<\/p>\n

The dollar was more mixed generally – with Japan’s yen gaining some ground on the U.S. yield retreat but sterling hobbled by weaker-than-forecast UK retail sales data.<\/p>\n

Top cryptocurrency bitcoin hit a fresh two-month low on Friday amid a wave of risk averse sentiment and the week’s rise in U.S. real yields.<\/p>\n

Events to watch for on Friday:<\/p>\n

* U.S. corporate earnings: Palo Alto Networks (NASDAQ:), Deere (NYSE:), Estee Lauder <\/span><\/span> (NYSE:) <\/p>\n

* U.S. Treasury auctions 30-year inflation-protected securities<\/p>\n

* U.S. President Joe Biden hosts Japan Prime Minister Fumio Kishida and South Korea President Yoon Suk Yeol in a trilateral summit at Camp David <\/p>\n

(By Mike Dolan, Editing by Elaine Hardcastle mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A look at the day ahead in U.S. and global markets from Mike Dolan A rekindled bond market fire storm and simmering China property crisis have dragged world stocks to two-month lows, but the sell-off in Treasuries appeared to ease somewhat on Friday and more credit easing is now expected from Beijing next week. 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