Global Bond Sell-Off Deepens as Oil Fuels Inflation Fears

Market Wrap-up: Oil Surge Drives Global Bond Yields Higher

Higher oil prices have renewed inflation concerns and uncertainty around the Federal Reserve's interest rate path, while selling also intensified across global bond markets.

The yield on the US 10-year Treasury rose 3 basis points to 4.7880%, its highest level in 20 months.

In Japan, the 10-year Japanese Government Bond (JGB) yield increased by more than 6 basis points to 3%, reaching this level for the first time since 1996. The two-year JGB yield also climbed to a 31-year high of 1.81%.

In the UK, the 10-year government bond yield, known as the gilt yield, rose by more than 9 basis points to 5.2341%, its highest level since June 2008, during the Global Financial Crisis.

US equity markets struggled as investors absorbed sharp moves in bond markets, with the Dow Jones, Nasdaq and S&P 500 all closing lower.

Uncertainty in the Middle East increased again as the US and Iran carried out attacks against each other following more than a month without such direct action. Brent crude, the international benchmark, rose 4.5% during the session to $94.52 per barrel. US WTI crude gained around 5% to $90.03 per barrel, its highest level since 24 July.

The US dollar (USD) recovered from its weak start to the week and regained upward momentum yesterday. The DXY index climbed back to 99.70, while gold fell nearly 3% to $4,329.47 per ounce amid higher Treasury yields and a stronger dollar.

Although gold is often viewed as a hedge against inflation, higher interest rates and US Treasury yields typically weigh on the precious metal by increasing the opportunity cost of holding a non-yielding asset.

In addition, a stronger USD makes dollar-denominated gold more expensive for overseas buyers.

On the latest economic data, the US ISM Manufacturing PMI fell to 54.6 in August, while US JOLTS job openings increased to 7.27 million in July. Both figures came in below market expectations, but had a limited impact on markets as developments in the Middle East overshadowed the economic data.

Looking ahead to today, markets will focus on the ADP Employment Change report for the private sector ahead of Friday's official Non-Farm Payrolls report.

CPT Markets · Related to your reading

Explore account information

Review account details, terms and risks on the official CPT website.

Open an account ↗

Trading Forex and CFDs involves risk. Availability and terms vary by jurisdiction and entity.

DXY:

Key takeaway:

• DXY rebounds towards 99.70 as rising Treasury yields and renewed Middle East uncertainty support demand for the US dollar.
• Stronger yields reinforce the dollar's appeal, while softer US economic data had limited impact on price action.

Technical Outlook:

• Daily Bias: Bullish
• Support: 99.35  
• Resistance: 100.00  

Gold:

Key takeaway:

• Gold falls nearly 3% to $4,329.47/oz, pressured by higher US Treasury yields and a firmer dollar.
• Rising yields increase the opportunity cost of holding gold, outweighing its traditional appeal as an inflation hedge.

Technical Outlook:

• Daily Bias: Bearish
• Support: 4,223
• Resistance: 4,376

Oil:

Key takeaway:

• Brent climbs 4.5% to $94.52/bbl, while WTI rises around 5% to $90.03/bbl as US-Iran developments increase uncertainty over regional supply.
• Higher oil prices revive inflation concerns, adding uncertainty around the Fed's interest rate outlook.

Technical Outlook:

• Daily Bias: Bullish
• Support: 87.31  
• Resistance: 93.53

Calendar Watch:

• US ADP Employment Change takes centre stage today as markets assess the health of the labour market ahead of Friday's Non-Farm Payrolls report.
• Markets will also continue to monitor developments in the Middle East, with any significant changes potentially affecting oil prices, inflation expectations and broader market sentiment.

Whether you are new to the markets or an experienced trader, stay connected to global markets with CPT Markets. Access advanced trading platforms, competitive spreads, and fast execution, with a seamless trading experience across multiple devices.

This content is provided for informational purposes only and does not constitute investment advice, investment recommendations, or an offer or solicitation to buy or sell any financial instrument. Trading financial products such as Forex and CFDs involves a high level of risk and may not be suitable for all investors.

You may lose all of your invested capital, and in certain circumstances, losses may exceed your initial deposit. Please ensure that you fully understand the risks involved and carefully consider your financial objectives, level of experience, and financial situation before trading.

View original English source