Government bond yields remained high on both sides of the Atlantic as investors continue to ponder the path towards lower interest rates ahead of US employment figures due on Friday.
US stock markets were closed and bond trading was shortened to mark the funeral of former President Jimmy Carter, with the yield on US 10-year Treasuries easing 2 basis points to 4.69%.
Yields have been elevated as investors weigh up the impact of US President-elect Donald Trump’s proposed tariff regime will have on inflation and how much that slows the Federal Reserve’s plans to cut interest rates. US non-farm payrolls figures on Friday in Washington is seen as another important piece of data in predicting that path.
Across the pond, 10-year UK gilts came off 17-year highs and were at 4.82% at 7am in Auckland, having surged 30 basis points in three days. The NZX-listed Smart Global Bond exchange traded fund fell for a third day yesterday.
The increased borrowing costs for the UK government have raised questions as to whether UK finance minister Rachel Reeves will have to cut spending or raise taxes to cover a higher finance bill, and asset managers such as PIMCO have said they’re still in the market for British government bonds despite the sharp moves.
That’s weighed on the Sterling pound, with the kiwi climbing to 45.51 British pence at 7am from 45.34 pence yesterday, having gained 1.8% so far this month. The kiwi was unchanged at 55.97 US cents.
Exporting success
The weaker sterling was a boon for stocks in London, with the FTSE 100 advancing 0.8% as investors eyed the benefits for exporters selling their goods at a lower price.
Stock markets were mixed on the continent, with France’s CAC 40 rising 0.5% and Germany’s DAX dipping 0.1%, as figures showed European retail sales grew less than expected in November.
Meanwhile, rising metal prices supported mining stocks in Canada and the UK and Australia futures are pointing to a 0.3% increase for the ASX 200 index today.
And across the Tasman, Insignia Financial may have attracted another suitor with The Australian newspaper reporting that Brookfield is weighing up a bid ASX-listed financial services firm. Insignia received a A$2.9 billion non-binding proposal from New York private equity firm CC Capital earlier this week.
Local data today include Australia’s monthly household spending indicator.
Reporting by Paul McBeth. Image from Matt Antonioli on Unsplash.
