Bond Yields Spike, Stocks Sink as Oil Hits $109 — SkimNews
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- Brent crude climbed to $109.97 a barrel after a 6% overnight jump, capping a weekly gain of nearly 13%, as oil flows remained restricted through the Strait of Hormuz and Iran-aligned Houthis seized Yemen's port of Mocha, threatening Saudi exports.
- U.S. Treasury yields spiked with the 10-year climbing to 4.9708% (three-year high) and 30-year yields hitting 5.3803% (19-year top), partly driven by a Treasury buyback program that fell short of the expected $6 billion value.
- Federal Reserve rate hike bets intensified after two-year yields jumped 12 basis points overnight, with markets pricing in roughly a 70% probability the Fed raises rates at its meeting next week, ahead of August CPI data due later in the day.
- Asian equities slumped, with Japan's Nikkei tumbling 2.8%, MSCI Asia-Pacific ex-Japan falling 1.8%, Hong Kong's Hang Seng dropping 1.5%, and Chinese blue-chips declining 1.2% as higher discount rates pressured valuations.
- JPMorgan analysts now expect eight of nine developed-market central banks to hike interest rates by year-end, including the Fed, Bank of Japan, all four European central banks, and the reserve banks of Australia and New Zealand.
- European Central Bank raised rates overnight for the second time this year, with officials signaling more tightening ahead and an October move in play.
- Helima Croft of RBC Capital Markets warned maritime traffic through Bab el-Mandeb is "gravely imperiled," projecting Brent could reach $121.99 a barrel if a full-blown Saudi-Houthi war resumes.
Why it matters: The 30-year Treasury yield hitting a 19-year high of 5.38% directly lifts U.S. mortgage rates and raises servicing costs on the $40 trillion federal debt, squeezing both homebuyers and the Treasury simultaneously. With the Fed now seen as roughly 70% likely to hike rather than cut, borrowing costs across the developed world are tightening in unison just as oil at $109 a barrel keeps inflation elevated.
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