UK 30-year gilt yields jumped to a 28-year high on Wednesday as a widening global bond selloff pushed US Treasury yields to their highest level since 2002. Oil above $100 a barrel and growing concern over France's finances added to the pressure, dragging down global stocks and the euro.
British 30-year gilt yields rose 13 basis points on the day to peak at 6.036%, their highest level since January 1998. The move surpassed the previous record set on October 1 and came a day after finance minister John Healey met economists from primary dealers to gauge market sentiment ahead of his first budget on October 28.
Britain's finance ministry said Healey had stressed the importance of fiscal credibility and reaffirmed the government's commitment to its fiscal rules. Economists at Bank of America forecast on Tuesday that Healey's budget could add £15 billion ($19.9 billion) to public borrowing in both the current financial year and 2027/28, leaving less room to meet longer-term budget goals.
Treasury yields climb in step
Thirty-year US Treasury yields rose 7 basis points on the day. Ten-year Treasury yields added 6 basis points, a smaller move than Britain's 10-year gilt.
Britain's 10-year gilt climbed 10 basis points to 5.48%, just short of its highest level since 2007. Twenty-year gilts were a whisker from their own record, with 30-year yields on course for their biggest daily rise since August 14.
Stocks and the euro retreat
Global stocks pulled back as the selloff widened beyond bonds. The S&P 500 slid 0.6%, a day after hitting a record. The tech-heavy Nasdaq fell 0.85% from its own all-time high.
MSCI's world stocks index dropped 0.9%, and Europe's STOXX 600 was down 1.1%, near its lowest level since June.
The euro slipped 0.7% to $1.118, after touching a 17-month low of $1.1161 earlier in the week. Wider bond-yield spreads in the euro area raise expectations of European Central Bank easing and revive fiscal-sustainability concerns, pressuring the currency.
Oil and France add to the pressure
Brent crude rose 1.65% to $102.24 a barrel as markets weighed a storm threatening US oil-producing regions alongside Houthi attacks on Saudi Arabia. US crude gained 1.34% to $90.64.
France's finances compounded the mood: the country's yield spread against German Bunds widened about 11 basis points to 140 basis points, having touched almost 160 basis points the previous week. According to Reuters, WisdomTree's Aneeka Gupta said: "Clearly the market is punishing France on its level of debt"
Fed minutes and Treasury auctions ahead
That selloff mirrors a broader move in US long-dated debt, which hit a 24-year high on Monday amid a run that has lasted since late August over inflation and the fiscal outlook. The Federal Reserve was due to publish minutes from its September 15-16 policy meeting later Wednesday, and traders have cut the odds of an October rate hike to 19%, down from about 50% a week earlier. A 10-year Treasury auction later Wednesday and a 30-year auction on Thursday will test investor demand for US debt.
Sources: Investing.com, Investing.com
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