Bond Selloff Grinds on as Oil Tests $94 a Barrel: Markets Wrap

Treasuries sold off while equities churned as investors contemplated the prospect of higher interest rates and rising oil prices as crude hit a one-year high. The dollar extended its climb for a sixth day.

(Bloomberg) — Treasuries sold off while equities churned as investors contemplated the prospect of higher interest rates and rising oil prices as crude hit a one-year high. The dollar extended its climb for a sixth day.

The yield on the 10-year traded above 4.6%, the highest since 2007, amid concerns about dwindling crude stockpiles and pressures on consumers. The ICE BofA MOVE Index — which tracks expected bond volatility — hit the highest in a month this week. 

Stock indexes erased a midday dip after President Joe Biden touted the promise artificial intelligence in a meeting with advisers. A pledge of executive action on AI in the fall helped the Nasdaq 100 end the day up 0.2% with AI-favorite Nvidia Corp. pulling the tech-heavy gauge higher. The largest US memory-chip maker, Micron Technology Inc., slipped in post-market trading after forecasting a worse-than-expected quarterly loss.

The S&P 500 ended the day little changed while the MSCI All Country World Index notched its ninth-straight decline, the global benchmark’s longest losing streak in a dozen years.

A potential shutdown that risks up to $1.9 billion a day in lost or delayed revenue and an autoworkers’ strike are worrying traders who are searching for signs that Federal Reserve officials may soften their hawkish message. 

“If these downside scenarios hit the US economy, we might then have to do less with our monetary policy to bring inflation back down to 2% because the government shutdown or the auto strike may slow the economy for us,” Minneapolis Fed President Neel Kashkari said in an interview on CNN. 

Read more: Fed May Do Less If Risks Like Shutdown Hit, Kashkari Says


Evercore ISI’s Krishna Guha said some tempering of the central bank’s messaging may be possible but an about-face is unlikely. 

“Investors are looking ahead to upcoming speaking events as potentially providing an opportunity for the Fed leadership to dial it back with a view to curtailing the tightening in financial conditions,” said the firm’s vice chairman. “We do not think there is any realistic prospect of any early U-turn absent a further dramatic surge in yields.”

Traders will be honing in on speeches from Fed Chair Jerome Powell and a slew of other central bank officials later this week. Friday data on the Fed’s preferred inflation measure, the personal consumption expenditures price index, will also be closely watched.

Marko Kolanovic, the chief market strategist at JPMorgan Chase & Co., issued a warning Wednesday that there could be more volatility ahead, calling this summer’s lower levels in the VIX — Wall Street’s fear gauge — a “technical aberration.” 

Meanwhile, consumer confidence has taken a knock from higher costs at the pump and the spreading impact of aggressive rate hikes. West Texas Intermediate briefly topped $94 a barrel while gold plunged for the third day. Appetite for the dollar continued to climb as a gauge of greenback strength rose for a sixth-day, its longest winning streak in a year. 

The Federal Reserve Bank of New York’s measure of how much bond investors are compensated for holding long-term debt turned positive for the first time since June 2021, suggesting traders are betting on elevated policy rates.

Read more: Treasury ‘Term Premium’ Gauge Positive for First Time Since 2021

“We are at an inflexion point in the economy and the bond market,” Bob Michele, CIO for fixed income at JPMorgan Asset Management, said in an interview with Bloomberg Television. “The last 15 years were not normal, we got to a structural low and now we are going to revert to something that is more normal.”

Read Surveillance Newsletter: JPMorgan’s Lonely Bond Bull Signals New Conviction


Later this week, a large options position held by a JPMorgan Chase & Co. equity fund has the potential to add fuel to the US stock selloff when tens of thousands of protective put contracts expire Friday at a strike price not far below the current level of the S&P 500.

Read more: JPMorgan ‘Options Whale’ Worries Resurface as Stocks Extend Drop

Key events this week:

  • Eurozone economic confidence, consumer confidence, Thursday
  • US initial jobless claims, GDP, Thursday
  • Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday
  • Eurozone CPI, Friday
  • Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday
  • US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday
  • ECB President Christine Lagarde speaks, Friday
  • New York Fed President John Williams speaks, Friday

Some of the main moves in markets:


  • The S&P 500 was little changed as of 4 p.m. New York time
  • The Nasdaq 100 rose 0.2%
  • The Dow Jones Industrial Average fell 0.2%
  • The MSCI World index fell 0.2%


  • The Bloomberg Dollar Spot Index rose 0.4%
  • The euro fell 0.6% to $1.0506
  • The British pound fell 0.2% to $1.2139
  • The Japanese yen fell 0.3% to 149.59 per dollar


  • Bitcoin rose 0.4% to $26,248
  • Ether rose 0.6% to $1,596.6


  • The yield on 10-year Treasuries advanced seven basis points to 4.61%
  • Germany’s 10-year yield advanced four basis points to 2.84%
  • Britain’s 10-year yield advanced three basis points to 4.36%


  • West Texas Intermediate crude rose 3.6% to $93.64 a barrel
  • Gold futures fell 1.4% to $1,893.70 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Cecile Gutscher, Alice Atkins, Sagarika Jaisinghani and Sujata Rao.

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