Bond Selloff Linked to Worries About Rates, War, U.S. Growth — Market Talk

0950 ET - The bond selloff "likely highlights that investors are not yet comfortable owning bonds," BofA Securities' Yuri Seliger and Sohyun Marie Lee say in a note. They argue that indications of robust U.S. economic growth "should not be a huge surprise" and the selloff highlights unease among investors with "the environment of a Fed restarting the hiking cycle, continued conflict in the Middle East, and a resilient US economy and consumer." Yields ease from record levels but remain elevated. The 10-year is at 5.096% and the two-year at 4.843%. ([email protected]; @ptrevisani)0921 ET - Institutional demand for Bitcoin remains remarkably resilient despite some immediate pressures that have pulled it back from a recent rally, XS.com's Simon-Peter Massabni says in a note. Bitcoin is trading down after touching 8-month highs twice this week. The pullback reflects macroeconomic pressures, primarily a shift in interest rate expectations from the Federal Reserve's recent tightening, along with pessimism around the conflict in Iran, Massabni says. But net inflows for Bitcoin ETFs have surged, positioning the funds for their strongest weekly performance since October of last year, Massabni says. The heavy institutional buying establishes a firm price floor, he says. ([email protected])0916 ET - Cleveland Fed President Beth Hammack says the inflation outlook remains highly uncertain, with risks tilted to the upside. When delivering opening remarks in Cleveland, Hammack says there is a greater risk that an inflationary mindset could take hold if multiple supply shocks occur sequentially. "The longer that high inflation persists, the more challenging and costly it can be to bring it back down," she says. "Because monetary policy affects the economy with long and variable lags, we need a reliable way to separate temporary moves in inflation from changes that are more persistent."([email protected])0907 ET - Treasury yields ease slightly but remain elevated amid interest-rate anxiety. Several Fed officials speak today, following recent hawkish comments. President Trump and China's Xi will likely discuss trade. Oil prices rise 2%. U.S. weekly jobless claims slip to 197,000 from an upwardly revised 198,000, versus WSJ consensus forecast of 201,000. August new residential sales, due at 10 a.m. ET, are forecast to expand by 1.8%, after July's 10.5% decline. Yields move little on the jobs data. The 10-year is at 5.116%, down from a 19-year high of 5.149% reached overnight. The two-year slips to 4.862% from a overnight high of 4.907%. ([email protected]; @ptrevisani)0837 ET - Payroll numbers in Canada ticked up in July, building on gains in recent months even as job vacancies in the country remain little changed. The number of employees receiving pay and benefits from an employer rose by 26,100, or 0.1%, for the month. That followed gains totaling 124,200 from March to June. On a year earlier, payroll employment was up 171,900 in July. For a seventh straight month, there was little movement in vacancies, which sat at 501,000 jobs. The data offers a counterpoint to Statistics Canada's more timely labor force survey. That survey pointed to a 41,700 drop in Canadian employment in August, pulling back on July's strong 75,100 gain but leaving the jobless rate steady at 6.4%. ([email protected]; @RobbMStewart)0801 ET - Optimism among small businesses in Canada has fallen sharply over both the near and longer term, the latest business barometer by the Canadian Federation of Independent Business shows. The outlook on a three-month and a 12-month basis now sits below the 50 neutral mark, retreating 9.6 points to 43.3 and 9.8 point to 47.9, respectively. Director of economics Andreea Bourgeois notes businesses are pointing to fuel costs as the top constraint on growth. As well, the survey finds that companies trading only in Canadian markets are more optimistic than those trading outside the country, exporting or importing. ([email protected]; @RobbMStewart)0720 ET - The Federal Reserve's decision last week to raise rates by 25 basis points reinforces a reality bond investors have been confronting for much of 2026: rates have moved meaningfully higher, and the path lower remains uncertain, Federated Hermes's Karen Manna says in a note. Multiyear high U.S. Treasury yields are reflecting a combination of resilient economic growth, persistent inflation concerns, elevated fiscal deficits and a market that continues to reassess where "normal" interest rates should reside, the fixed income strategist says. "While rising yields have created short-term price pressure, we think they have also improved the long-term opportunity set for fixed income investors. This distinction is important," she says. ([email protected])0716 ET - Over shorter periods, changes in interest rates often dominate bond performance, but over longer horizons, coupon income has historically served as both the primary driver of total return and the source of consistent income, Federated Hermes's Karen Manna says in a note. "In addition, higher starting yields could translate into stronger future return potential," the fixed income strategist says. Federated Hermes continues to favor the front end of the yield curve, where investors have the opportunity to earn income while limiting exposure to additional interest-rate volatility. "We believe one- to three-year maturities currently offer an appealing balance between yield potential and risk management," she says. Federated Hermes says that much of the repricing associated with a 'higher-for-longer' environment has already occurred. ([email protected])0707 ET - Short-dated bonds look attractive due to high interest rates and provide a favorable income opportunity, Federated Hermes' Karen Manna says in a note. The short-term bonds also limit "exposure to additional interest-rate volatility," she says. "We believe one-year to three-year maturities currently offer an appealing balance between yield potential and risk management." U.S. two-year Treasury yields hit 4.947% on Wednesday, the highest since May 2024, before retreating to last trade at 4.870%, LSEG data show. ([email protected])0638 ET - Mounting competition for funds by governments and corporates is causing sharp moves in the global bond markets, Quilter Cheviot's Richard Carter says in a note. AI-linked companies are expected to issue more debt to fund their expansion and governments borrowing needs are rising, leading investors to demand extra compensation to buy bonds. U.S. 10-year Treasury yields hit 5.150%, their highest since 2007, Tradeweb data show, while 10-year German Bund yields rise to 3.578%, their highest since 2009. Ten-year gilt yields rise to a nine-day high of 5.389%. ([email protected])0635 ET - The cost of default protection for euro high-yield credit climbs to a four-month high as risk appetite falls and global government bond yields climb to multi-year highs. U.S. 10-year Treasury yields hit 5.150%, the highest since 2007, due to inflation concerns and fiscal jitters. Rising global government bond yields have led to subdued demand for risk assets. The iTraxx Europe Crossover index of euro high-yield credit default swaps rises 1 basis point to 286bps, the highest since May 19, S&P Global Market Intelligence data show. ([email protected])0511 ET - The euro's break below $1.14 has sent the exchange rate into stretched undervaluation territory, ING's Francesco Pesole says in a note. Short-term rate differentials have actually moved in favor of the euro, offsetting the negative impact on fair value from lower equities and oil, the currency strategist says. The euro's decline is entirely driven by a stronger dollar, he says. Buying the euro looks risky for now but a decline to new lows is unlikely unless the short-term rate differential widens in favor of the dollar, he says. The euro falls on Thursday, matching Wednesday's eight-week low of $1.1367, LSEG data show. A $1.1430-$1.1450 level would be more in line with the current environment, Pesole says. ([email protected])