Bond selloff deepens as US data and Japan rate hike rattle markets

Global bond and equity markets are under pressure, with Bloomberg reporting AMP economist My Bui's projection that US 10-year yields could hit 5% as structural inflation persists. The selloff is compounded by a surprise Bank of Japan rate hike and weaker US jobs data, raising recession fears. For European investors, UK bond yields are surging amid fiscal policy reversals, per OKX Europe.

Bottom line — Schroders warns that US Treasury yields could reach 5%, amplifying risks for European portfolios and UK fiscal stability.

Go deeper (8)

• Bloomberg reports AMP economist My Bui projects US 10-year Treasury yields could reach 5% as structural inflation drivers remain intact, keeping Federal Reserve rates elevated.
• The Dow Jones Industrial Average fell 1,000 points and the Nasdaq saw a €0.92 trillion ($1 trillion) wipeout, the largest one-day selloff this year, according to InvestorPlace.
• The Bank of Japan raised interest rates to 0.25%, an unexpected move that Schroders says unwound yen carry trades and fuelled market volatility, with Japanese exporters likely hit.
• US non-farm payrolls added 114,000 jobs in July, well below the 175,000 consensus, triggering the Sahm rule recession indicator, per Schroders' senior US economist George Brown.
• InvestorPlace notes US political gridlock on tax cuts and near-frothy valuations (S&P 500 forward P/E of 26.6x) are contributing to the selloff.
• Schroders reports Q2 earnings growth for the S&P 500 is 14%, above consensus, but the market is disappointed by the muted scale of positive surprises.
• OKX Europe highlights that UK government bond yields are surging due to fiscal policy reversals, raising borrowing costs and threatening political stability.
• OKX Europe adds that tech stocks are disproportionately affected, with put-call ratios for Apple and Nvidia signalling a potential 20% correction in the sector.

Read the reporting