Original title: bond markets in Europe and the United States fell: the yield on 10-year US Treasuries rose to a three-month high

Source: Wall Street

On September 27th, European and American government bonds fell, and bond yields rose one after another.

The yield on the US 10-year note rose to 1.492 per cent, the highest in nearly three months, the yield on the two-year note rose to 0.288 per cent, the highest level since April 2020, and the yield on the five-year note rose to nearly 0.99 per cent, the highest level since February 2020.

There were also big gains in the European bond market:

German 10-year Bund yields reversed early losses and rose to a three-month high of-0.207 per cent.

Italian 10-year bond yields rose above 0.80% for the first time since early July; French and Austrian 10-year bond yields also rose sharply.

The yield on 10-year gilts rose to its highest this month to 0.96 per cent, up 4 basis points on the day.

The yield on 20-year gilts also rose to its highest level since the end of June to 1.270 per cent, up 3 basis points on the day.

CITICPreviously, in view of US debt interest rates, it was said that it was necessary to guard against the risk of a new round of rise in US bond interest rates, which may rise to about 1.8% this year. There is a high probability that the US debt ceiling issue will be resolved, or it will completely change the relationship between supply and demand of US debt and push up US debt interest rates.At the same time, under the influence of such factors as the reduction in the scale of bond purchases by central banks in major developed countries around the world, the expected rise in interest rate increases and the epidemic situation, US debt interest rates are under upward pressure.

Cyclical stocks and small-cap stocks rise with the trend.

The analysis believes that the current US 10-year Treasury yield may still rise further in the short term, and stock valuations may face downward pressure, but cyclical and small market capitalization stocks are more valuable for investment.

Because higher bond yields suggest that inflation is widely expected to intensify in the face of strong economic demand. This trend makes cyclical stocks more attractive because they are more sensitive to changes in the economic environment.

Jonathan Krinsky, chief market technician at Bay Crest Partners, believes the 10-year Treasury yield could rise to 1.6 per cent, according to Barron Weekly. With the yield above 1.38 per cent and breaking a six-month downward trend, "a new trading band is emerging".

If bond yields suddenly soar, which means that bond prices fall, then the stock market will be relatively less attractive and equity valuations will fall sharply.

According to the analysis, although the excessive rise in bond yields may be disadvantageous to the stock market, the stocks that are most sensitive to the economy are still likely to outperform the market.

According to Barron Weekly, Hank Smith, director of investment strategy at Haverford Trust, said:

Another variable that affects the outcome is the rate at which yields rise. If the 10-year yield reaches 2% by the end of the year, either the economy is booming as it did in the second quarter, or the stock market will not perform very well.

But no matter what happens to the whole market, cyclical stocks can play a safe haven as long as the economy continues to develop.

Another variable that affects the outcome is the rate at which yields rise. If the 10-year yield reaches 2% by the end of the year, either the economy is booming as it did in the second quarter, or the stock market will not perform very well.

But no matter what happens to the whole market, cyclical stocks can play a safe haven as long as the economy continues to develop.

At the same time, many central banks around the world have begun to tighten monetary policy.

The Fed has hinted that the taper could be announced at its FOMC meeting in November at the earliest. According to the federal reserve bank of St. Louis, inflation expectations in the u. S.market over the next 10 years are now 2.34%, which is another reason why 10-year Treasury yields are likely to rise further.

The analysis points out that in this economic environment, small-cap stocks can particularly benefit from it.

Because the profits of small-cap stocks are usually more dependent on domestic economic growth, and it is easier to obtain capital when the economy is growing. And regardless of the size of the company, companies in economically sensitive industries such as banks and oil can also benefit.

Since 10-year Treasury yields began to soar, the Russell 2000, which represents small-cap stocks, has risen 3 per cent, outpacing the 2.2 per cent rise in the s & p; cyclical sectors have also outperformed the broader market. For example, SPDR s & p bank exchange traded fund KBE and energy select industry SPDR fund XLE rose 5.6 per cent and 7.7 per cent respectively over the same period.