Bonds extend sell-off on inflation fears

{"text":[[{"start":9.25,"text":"A global bond sell-off pushed government borrowing costs higher on Monday, as investors bet that the energy shock from the Middle East conflict would lead to a prolonged period of higher inflation."}],[{"start":21.45,"text":"Japanese debt led the declines, with the yield on the country’s 30-year bond rising 0.08 percentage points to 4.09 per cent, as the trading week kicked off dominated by the spectre of higher inflation. "}],[{"start":35.8,"text":"A lack of progress in peace talks between the US and Iran, and the ongoing closure of the Strait of Hormuz, has pushed oil prices higher and led investors to fear a looming oil shortage with brutal economic consequences. "}],[{"start":49.75,"text":"The yield on the 30-year US Treasury — a benchmark for long-term global interest rates — rose as high as 5.16 per cent, its highest level since October 2023, before falling back slightly. Yields move inversely to prices."}],[{"start":66.8,"text":"Stronger than expected inflation data from the US reignited inflation fears in markets last week, and prompted traders to add to their bets that the Federal Reserve will have to raise interest rates to combat rising prices. Swaps market pricing suggests investors are now putting a 75 per cent probability on a quarter-point increase by the end of 2026."}],[{"start":88.85,"text":"European government bonds also weakened further on Monday, with the yield on the 30-year German Bund yield rising 0.02 percentage points to 3.69 per cent, the highest level for the country’s long-term borrowing costs since 2011. "}],[{"start":103.94999999999999,"text":"“Inflation and deficit worries are weighing on the bond market,” said Mohit Kumar, chief European economist at Jefferies. “US and Iran still appear far from a deal,” he added, while “high oil prices are also likely to draw support measures from various governments which would [add] fiscal pressure,” he said."}],[{"start":null,"text":"

"}],[{"start":122.24999999999999,"text":"In the UK, gilts strengthened slightly after a week of heavy selling amid political uncertainty. The 30-year yield remained near its highest level since 1998."}],[{"start":132.64999999999998,"text":"While Monday’s move higher in yields was less severe than on Friday, investors said the sustained pressure on bond markets reflected concerns about the trajectory for oil prices and inflation."}],[{"start":143.95,"text":"The lack of progress in reopening the Strait of Hormuz, a vital waterway for global energy supplies that has been shut since the Iran conflict started in late February, has deepened concerns that the global economy is facing an oil shortage in coming months."}],[{"start":160.1,"text":"Brent crude, the international oil benchmark, was up 0.5 per cent to just below $110 a barrel in London morning trading. Brent has surged more than 50 per cent since the US and Israel first launched air strikes on Iran."}],[{"start":175.7,"text":"The bond sell-off dragged stock markets lower on Monday. Japan’s Nikkei 225 was down 1 per cent, while the Stoxx Europe 600 fell 0.5 per cent. Futures contracts tracking the S&P 500 pointed to a 0.4 per cent decline at the open on Wall Street, extending a more than 1 per cent drop on Friday."}],[{"start":198.45,"text":"Eric Robertsen, head of global research and chief strategist at Standard Chartered, said investors were also fearful of the impact on governments’ finances as leaders around the world take steps to shield households from higher energy prices."}],[{"start":213.6,"text":"“Fiscal risks are one of the key economic and financial risks for the second half of the year,” said Robertsen."}],[{"start":220.35,"text":"Almost 80 countries have introduced emergency measures to protect their economies from the effect of the historic surge in energy prices."}],[{"start":229.15,"text":"“There’s an uncomfortable confluence of events right now. The fiscal backdrop is the poorest going into any crisis we’ve experienced,” said Richard Yetsenga, head of research at ANZ."}],[{"start":241.20000000000002,"text":"“The energy crisis itself is negative for fiscal because the pressure on governments to subsidise households,” he said."}],[{"start":248.55,"text":"Mitul Kotecha, a macro strategist at Barclays, said anxiety over oil prices was amplified by the failure of last week’s summit between US President Donald Trump and Xi Jinping, his Chinese counterpart, to signal any progress in reopening the strait. "}],[{"start":264.65000000000003,"text":"“The Trump-Xi summit did not show any progress over the Strait of Hormuz, which would have alleviated some pressure over oil prices,” he said. “There is a fear we might be at a pivot point over energy markets.”"}],[{"start":282.90000000000003,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779105052_9387.mp3"}