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Bonds Plunge With Nasdaq Futures on Inflation Risk: Markets Wrap

(Bloomberg) — Inflation concerns are rattling investors once again, fueling a selloff in U.S. bonds and sending Nasdaq futures sharply lower.

Ten-year Treasury yields climbed above 1.7% for the first time since January 2020, while the 30-year breached 2.5% for the first time since August 2019. Contracts on the Nasdaq 100 Index, a benchmark for high-valuation stocks that are sensitive to rising yields, sank 1.6%. Tesla Inc. slumped in pre-market trading.

U.S. equities look poised to reverse some of the gains from Wednesday, when markets hit an all-time high. The Federal Reserve’s apparent willingness to keep pumping support into the economy and let it run hotter has spurred bets on faster growth and inflation, sending market expectations of price pressures to multi-year highs.

“Judging by the increase in yields on Thursday morning, financial markets fear the Fed might be too relaxed about the risks of an overheating economy and runaway inflation,” according to Silvia Dall’Angelo, senior economist in Federated Hermes’s international business. “Volatility in bond markets is likely to continue, fueled by the vagueness of the Fed’s reaction function.”

The dollar held gains after initial jobless claims unexpectedly rose last week to the highest since mid-February.

Read: Treasury Yields Top 1.75% After Powell Spurs Bets on Inflation

In Asia and Europe, stocks were boosted by lingering enthusiasm from the Fed’s outlook for stronger growth. Automakers and banks, which tend to outperform during cyclical upswings, led gains in Europe. Japan’s Topix jumped past the 2,000 mark for the first time since 1991, becoming the region’s top-performing major equity index this year.

Elsewhere, oil slipped after U.S. crude stockpiles topped half a billion barrels and the International Energy Agency said global supplies are plentiful. Bitcoin traded around $58,000.

Japan’s government bond yields rose on a Nikkei report that the Bank of Japan is considering widening the trading range around the 10-year target, which could spur concerns about policy tightening.

These are some key events this week:

Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.

These are some of the moves in markets:

Stocks

Futures on the S&P 500 Index sank 0.6% as of 8:37 a.m. New York time.The Stoxx Europe 600 Index climbed 0.1%.The MSCI Asia Pacific Index rose 0.8%.The MSCI Emerging Market Index increased 0.6%.

Currencies

The Bloomberg Dollar Spot Index increased 0.3%.The euro declined 0.4% to $1.1928.The British pound declined 0.2% to $1.3934.The onshore yuan was little changed at 6.506 per dollar.The Japanese yen weakened 0.2% to 109.08 per dollar.

Bonds

The yield on 10-year Treasuries climbed nine basis points to 1.74%.The yield on two-year Treasuries gained two basis points to 0.15%.Germany’s 10-year yield gained three basis points to -0.26%.Japan’s 10-year yield climbed one basis point to 0.114%.Britain’s 10-year yield rose six basis points to 0.892%.

Commodities

West Texas Intermediate crude declined 1.3% to $63.76 a barrel.Brent crude dipped 1.3% to $67.13 a barrel.Gold weakened 0.8% to $1,730.58 an ounce.

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