Interest rates on U.S. government bonds soared again on the 17th (local time) as U.S. consumption showed stronger than expected.
Two-year government bonds also hit a 17-year high. BlackRock, the largest asset management company in the U.S., predicted that interest rates on government bonds could continue to rise for the time being.
On the same day, the yield on two-year government bonds, which moves on interest rate expectations in the New York market, rose 0.09 percentage points to 5.20 percent per year. It is the highest since 2006.
The yield on the 10-year Treasury, a benchmark for global financial assets, rose 0.15 percentage point to 4.85 percent. It is close to the highest level in the past 16 years as concerns over a long-term rise in interest rates have shaken the global bond market.
According to the U.S. Department of Commerce’s announcement on the same day, retail sales in September rose 0.7% from the previous month to $704.9 billion, far exceeding expert forecasts (0.2%).
With the outbreak of war between Israel and Hamas sparking demand for safe assets such as government bonds, the prospect of stronger-than-expected consumption could lead to longer-term interest rates on bonds has weighed on.
Experts predicted a slowdown due to an increase in delinquency rates, a fall in savings, and the start of student loan repayment, but U.S. consumption was found to have supported the economy stronger than expected.
In response, BlackRock predicted that government bond yields could continue to rise, and bond market volatility would expand for the time being.
Although government bond rates have already risen a lot, BlackRock assessed that interest rates are likely to rise further as investors demand more compensation (premium) for long-term bonds.
As the high-interest rate situation continues, the U.S. housing construction market is experiencing a cold wind.
The September housing construction confidence index, jointly calculated by the National Housing Construction Association (NAHB) and Wells Fargo, fell 1 point from the previous month to 40, falling for the third consecutive month. If the index is below the standard of 50, it means that more people are pessimistic about the market.
Mortgage rates soared sharply, affecting market sentiment.
According to U.S. mortgage lender Freddie Mac, the average interest rate for 30-year fixed-rate loans was 7.57% per year on the 12th, which is expected to be around 8% per year as it continues to rise this year.
In addition, the value of the U.S. dollar rose slightly against the Japanese yen, but fell slightly against the euro, making little change in the dollar index.
In addition, international oil prices remained flat as investors watched the Middle East situation, including U.S. President Joe Biden’s visit to Israel. In the New York market, the price of West Texas Intermediate (WTI) crude oil (WTI) for November fell and recovered from its fall, closing at $86.66 per barrel, the same as the previous day. Brent crude rose 25 cents, or 0.3%, to close at $89.90 a barrel on the London ICE futures exchange.
Meanwhile, according to the Chicago Mercantile Exchange (CME) FedWatch, the Federal Fund (FF) rate futures market sees a 43% chance of further rate hikes this year. However, the possibility of a rate hike in November was only 12%.
Jennifer Kim
US ASIA JOURNAL
