Fed surge frenzy drives global bond yields up

Central Bank of Romania to step up rate hikes to tame prices

“The contrast between a hawkish Fed and the more cautious RBA approach should mean there’s scope for Australian bonds to outperform,” said Andrew Ticehurst, rates strategist at Nomura Holdings Inc. in Sydney. “There may be some reluctance after those who went long Aussie rates in October got beat up when yield-curve control was scrapped. But it’s a new year now, and omicron is with us, big time, so some investors may consider wading back in to buy bonds here.”

Bond yields are taking off all around the world in accordance with Treasuries as investors getting ready for the primary Federal Reserve interest-rate climb of the pandemic time put away concern the flare-up will slow their generally fragile economies. Australia’s bond market – – currently a point of convergence during last year’s worldwide spike in yields – – is busy selling off even as a spiraling omicron episode pushes examiners to additional trim figures for the country’s economic development. The defeat Down Under comes as traders bet the Reserve Bank of Australia will follow the Fed in raising rates, in spite of assumptions inflation in the more modest economy will be well beneath the raised U.S. levels.

Treasuries extended losses from the London open, with five-year yields rising as much as four basis points to 1.54%, the highest level in two years. U.S. yields had jumped across the curve on Friday after the release of December’s payroll data.

Bond investors are being whiplashed globally as central banks take steps to remove extraordinary stimulus across developed economies. Australia’s yield spiked up in late October after third-quarter data showed underlying inflation was faster than economists predicted. The yield on the April 2024 bond climbed as high as eight times the RBA’s stated target of 0.1% for the security under its yield-curve control policy, convincing it to scrap the program at its November meeting.

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