US bond yields are on the charge and stocks don't like it one bit

Grumpy cat. Photo: Getty Images
  • US 10-year bond yields jumped following the release of the minutes of the Fed’s January interest rate meeting.
  • They now sit just below 3% resulting in a rebound in the US dollar and late plunge in US stocks.
  • With yields higher, the US dollar stronger and stocks staging a later reversal, it could be a difficult trading session for Asian investors

US bond yields are spiking again and stocks don’t like it one bit, mirroring the price action seen at the start of February when volatility began to spike.

Here’s the yield for benchmark US 10-year treasury notes going back to mid-2014.


At 2.95%, its now fast approaching the 3% level it tried-and-failed to break on two separate occasions back in late 2014.

It’s also above the levels that led to the wild selloff in global stocks at the start of February.

The latest increase was driven by the release of the minutes of the US Federal Reserve’s January FOMC meeting, something that after some initial confusion was eventually deemed to be more hawkish than many were anticipating.

“The January FOMC statement featured the addition of the word ‘further’ in describing the committee’s expectations for increases in the federal funds rate, and today’s release of the meeting minutes confirmed that this addition was intended as a hawkish signal,” says JP Morgan.

“The committee’s discussion of the growth outlook was bullish, with participants ‘generally’ seeing ‘substantial underlying economic momentum’ and ‘some’ noting increased upside risks to the economic outlook.”

The lift in US yields saw the US dollar index, or DXY, lift to the highest level since February 14, extending its rally from the multi-year low of 88.253 struck last week to over 2%.

Combined with the lift in yields, that saw the Dow Jones Industrial Index fall close to 500 points from its intra-session high, eventually closing down 0.67% at 24,798 points.

With yields and the US dollar higher, and with US stocks staging a dramatic late reversal, it looks set to be an interesting day in Asia.

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