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Treasury bonds remain under pressure as traders weigh growth prospects

European equities were subdued on Monday, while US Treasuries remained under pressure as investors weighed developments in Ukraine and the prospect of tighter monetary policy from central banks to curb inflation.

The regional stock index Stoxx Europe 600 was unchanged. The London FTSE 100 gained 0.2 percent. US futures contracts implied small losses for Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq 100 index.

Meanwhile, the US Treasury yield curve has inverted the most since 2007, as measured by the difference in 2-year and 10-year borrowing costs, after US Treasuries posted yields the worst quarter on record in the first three months of this year as traders eyed a series of rapid rate hikes from the US Federal Reserve.

The yield on the two-year Treasury note, which is moving in the opposite direction of its price, rose 0.04 percentage point to 2.48 percent on Monday. Sensitive to interest rate changes, this yield rose above the 10-year note last week for the first time since 2019. The yield on the 10-year note – a measure of global borrowing costs – rose 0.04 percentage points to 2.42 percent.

The inversion of this closely watched section of the yield curve is usually taken as a sign of an impending recession. However, economists and policymakers are uncertain whether the Fed’s huge bond-buying program in the pandemic era may have distorted the bond market and distorted yields.

Elsewhere, in Hong Kong, stocks rose sharply after regulators in China eased restrictions barring US agencies from access to audits.

The Hang Seng Tech Index rose 4.9 percent, with video platform Bilibili and electric vehicle maker Li Auto among the biggest climbers, up 12.6 percent and 10 percent, respectively.

The price surge came after the China Securities Regulatory Commission, Beijing’s top financial watchdog, said on Saturday it would change confidentiality laws that prevented its foreign-listed companies from sharing sensitive financial information with foreign regulators.

The US Securities and Exchange Commission said last month that China’s biggest companies had three years to provide detailed audit documents or be delisted, hastening a sell-off in Chinese tech stocks listed in the US and Hong Kong.

Saturday’s announcement was expected to create a framework for US regulators to gain access to companies’ audit files

Tech gains helped the Hang Seng Index climb 1.8 percent on Monday. In South Korea, the Kospi rose as much as 0.7 percent, while the Japanese Topix rose 0.5 percent. Australia’s S&P/ASX 200 gained 0.3 percent. Markets in mainland China were closed for a public holiday.

Oil prices rose after last week’s declines, with Brent crude, the international benchmark, rising 1.2 percent to $105.61 a barrel.

https://www.ft.com/content/771b0ece-b544-4236-bd87-fe26f18999ee Treasury bonds remain under pressure as traders weigh growth prospects

Adam Bradshaw

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