“The moves in developed market fixed-income, which are largely behind the volatility, have stemmed from Japan and the potential changes in monetary policy”, said Chris Weston, chief markets strategist at IG Markets. The Nasdaq held about 0.2 percent lower after the open.
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“Having just increased stimulus in August, the BoE won’t be eager to add bond purchases or cut interest rates again”, wrote Kathy Lien, managing director of FX Strategy at BK Asset Management. “The rest of the market participants have had to simply react”.
The fall in the 10-year yield slowed as bond market weakness, which had sent it to a three-month high of 1.752% earlier this week, ebbed slightly.
On Wall Street, S&P 500 Index lost 1.48 percent to 2,127.02, a two-month low. Although it has managed to hold above its 200-day moving average, which stood at 2,121, a break of that level could sap market confidence. US long-term yields have risen in the past month, hitting a three-month high on Tuesday.
Investors were also unnerved by a sharp rise in long-term global bond yields.
The rise in US bond yields came even as expectations on the Federal Reserve’s monetary policy outlook hardly changed.
(Updates prices, adds details on Bank of Japan) * Consumer price inflation rises more than expected * Traders increase odds of December rate hike * Fed, Bank of Japan meetings next week in focus By Karen Brettell NEW YORK, Sept 16 (Reuters) – U.S. Treasuries yields rose on Friday after data showed that U.S. consumer prices increased more than expected in August, raising the odds that the Federal Reserve will raise rates later this year.
The Labor Department said on Friday its Consumer Price Index rose 0.2 percent last month after being unchanged in July. Higher inflation also flattened the yield curve, pausing this month’s relentless steepening.
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HSBC sees fair value for the dollar at between 93 and 99 yen, and expects the dollar to trade at 95 yen by year-end. But when the BOJ shocked markets in January by cutting rates below zero for the first time in an attempt to weaken the currency, the yen reaction was only temporarily – and since then it has gained nearly 20 percent. The yield curve between five-year note yields and 30-year bond yields flattened to 123.70 basis points, after reaching its steepest levels in two-and-a-half months on Thursday at 130 basis points. But the commodity-linked currency has pulled back thanks to sizeable gains in prices of commodities such as copper and crude oil following a rough patch earlier this week. Brent futures rose 15 cents to US$47.25 a barrel, while USA light crude rose 20 cents to US$45.10 as data from an industry group showed a smaller-than-expected build in USA crude stocks.
