On Monday, the treasuries sold off to extend the worst bond slide in decades, as UK tax cuts fueled concerns that government spending will cause global central banks to become even more hawkish.
None of the pound plunges to record low as Kwarteng Signals More Tax Cuts are announced.
The US government debt slid across the curve and German bund futures declined. The UK government s package of tax cuts and regulatory reforms caused five-year gilts to slide by the most in at least three decades on Friday after it was released. Equities and other risk assets dropped and the pound fell to a record low.
Markets are still digesting the implications of the UK's fiscal statement and the massive move in gilts, said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada. She said that investors are fretting over the pressure on government to deliver cost of living relief, with any loosening in fiscal settings putting pressure on central banks to do more of the heavy lifting.
Bonds and stocks are tumbling this year, as the Federal Reserve leads most central banks in a rapid shift away from the monetary policies of the Pandemic, which involved keeping interest rates near zero and buying government securities to keep down yields. According to Bank of America Corp. strategists, the world's worst year since 1949 is when bond markets across the globe are on course for the worst year since 1949, when Europe was rebuilding from the ruins of World War Two.
The yield on US 10 year Treasuries climbed as much as six basis points to 3.72% after five-year gilt yields jumped 51 basis points Friday. The pound dropped as much as 4.7% to $1.0350, causing declines across major currencies against the dollar. The stock indexes fell more than 1.5% in Japan, South Korea, Australia and Taiwan.
It is a sell everything world! James Wilson, a senior portfolio manager in Melbourne, said he was a senior portfolio manager at Jamieson Coote Bonds. He said that the VIX gauge of implied volatility for the S&P 500 - often called a fear gauge for stocks may have some catching up with the MOVE index for Treasuries.
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