Global Bond Yields Surge as Fed Prepares to Hike Interest Rates
August saw borrowing costs reach multi-decade highs as the Federal Reserve prepared to hike interest rates. The 30-year Treasury yield hit its highest since 2007, prompting a doubling of buybacks on 10- to 30-year debt by the US Treasury.
This move steadied the long end of the curve but sparked concerns about debasement and sent gold prices soaring to a three-month high near $4,700/oz. The Fed's hawkish stance was reinforced by Kevin Warsh at Jackson Hole, who warned that better summer inflation prints do not necessarily indicate improved underlying trends.
The S&P 500 gained 2.6% in August, while the Nasdaq Composite rose 3.9%, both snapping two-month losing streaks. The Dow secured its fifth consecutive winning month with a 1.3% gain. In contrast, Seoul's KOSPI rebounded by 22% from its July low after SK hynix announced a large buyback.
The global bond market saw a significant shift in August, with long-end yields rising across the board. The UK's 50-year gilt reached a record 5.39%, while Japan's 10-year JGB hit its highest since 1996 at 2.945%. Central banks responded by increasing buybacks or shifting issuance to shorter maturities.
The G20 finance track in Asheville saw competing views on the global order, with the US pushing for secondary sanctions on enablers of Iranian oil exports and a joint statement with no targets. The SCO's 10 members signed a declaration condemning unilateral sanctions and demanding more developing country weight in the IMF.