This will resurrect the ghosts of the bond market vigilantes of the Clinton-era in the 1990s.
These bond market worries briefly sent the Dow into a correction earlier this week, a 10% decline from recent highs.
Volatility's grip on global markets tightened Thursday, as surging Treasury yields renewed concern that higher rates will drag on the economy and pushed USA stocks lower for the fourth time in five days. But a stock market accustomed to a steady climb for more than a year and half as given way to two weeks of shaky selling. The Dow plunged more than 1,000 points.
"Bottoming is a process".
"We broke the 50-day". Under these circumstances, everybody becomes a technician. "The overall market could have taken a cue from some of the bigger names". However, we find that incorporating the changing level of interest rates into an analysis of the yield curve yields important insights beyond what just the slope of the yield curve can tell us. On the S&P 500, that was 2,715.
"I don't think markets can recover immediately (from the shock), there needs to be a stabilisation phase". "You'll probably have to do some backing and filling before you see what's next".
"We haven't seen interest rates rise like this in a long time", Guerrini said.
The yield on 10-year Treasuries rose three basis points to 2.87 percent, the highest in about four years. Last week, the market was betting on possibly four hikes, and now the derivatives market is pricing in less than the three rate hikes the Fed forecast for this year. The unemployment rate was at a near 17-year low of 4.1%.
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With the US economy doing well, chances are that the US Fed may go for more rate cuts than the market was anticipating.
The technology-laden Nasdaq and the broad Standard & Poor's 500-stock index also drifted lower during the day - and each was down more than 3 percent.
"You don't want to move too much too soon", Coupe said. And the more bond yields rise, the more will be this opportunity cost.
"We are in a complacent era", McCarthy said. He speaks publicly before Congress on February 28 when he delivers testimony on the economy. The central bank has been unable to significantly raise its interest rates over the past decade, fearing it could stymie the economic recovery and perhaps cause prices to fall.
Kohli said the market has to readjust to a world with volatility. And indeed, we got our breakout in the short bonds ETF.
Similarly, between May 2003 and June 2006, a 177 bps surge in the UST 10-year yield failed to deter United States equities from notching up 32 per cent gain. Credit Suisse said Tuesday it would close the fund.
The world has turned uglier for stock market bulls and leveraged bond market bulls are on the road to financial suicide, assisted merrily along by a fee-driven Private Bankerji.
"The dust hasn't settled yet, and I think both buyers and sellers are trying to figure out what this market really wants to do", said Jonathan Corpina, senior managing partner for Meridian Equity Partners in NY.
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5-year -10.3 bps @ 2.486%. "It just manifested itself in a major VIX unwind".
"Buying on the dip doesn't really die easily". That only happened eight times all of previous year, the fewest since 1964, according to LPL.
Added to the worries of bonds' prices rising and the country reaching nearly full employment, was the suggestion made by Dallas' Federal Reserve President Robert Kaplan. In other words, the bet was that central bankers would add stimulus or, in recent years, halt their tightening path on signs of unusual turbulence.
Keon said he expects the 10-year Treasury yield to head higher. This pushed up United States bond yields sharply, which in turn hit equity investor sentiments. "It's happening very slowly and smoothly so far".
Alexandra Coupe, associate director investment manager PAAMCO, said rising inflation makes stocks less attractive.
7-year -10 bps @ 2.665%.
Traders will be watching for comments on inflation or on the market sell-off. Minneapolis Fed President Neel Kashkari, Kansas City Fed President Esther George and Dallas Fed President Robert Kaplan are all set to deliver remarks at their own individual speaking events.
Dow Jones suffers worst loss in six years
USA crude fell 2.08 percent to US$62.07 per barrel and Brent was last at $66.12, down 1.11 percent on the day. Emerging market stocks lost 2.74%, but the iShares MSCI emerging markets exchange-traded fund jumped 3.3%.
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