Latest news with #yields
Malay Mail
a day ago
- Business
- Malay Mail
The World Debt Situation Has Become More Unstable, Octa Broker warns
5-Year Credit Default Swaps Source: LSEG Yields on 20-Year Government Bonds Source: LSEG KUALA LUMPUR, MALAYSIA - Media OutReach Newswire - 30 May 2025 - Traders and investors alike are unnerved by the recent turbulence in the bond markets. After Moody's—a major rating agency—downgraded U.S. government debt on 16 May, and Japanese long-term bond yields soared to multi-decade highs, some market participants started to fear that the world may be on the verge of a major debt crisis. Meanwhile, the yield on 20-year UK government bonds neared 5.5%, a level not seen in 27 years, as investors grew more worried about the extent of Chancellor Rachel Reeves' borrowing plans. Octa Brokers looks at the potential implications of these developments for global U.S. mounting national debt has long been the subject of intense debate and concern among economists, policymakers, and the public. Apocalyptic predictions of a U.S. default and dollar collapse are nothing new. They first appeared decades ago and have been surfacing here and there regularly, attracting plenty of followers. However, these predictions have never materialised, while the doomsayers have been dismissed as amateur conspiracy theorists at best and irresponsible alarmists at worst. Still, while we are not inclined to take a grand stance on this issue, we cannot afford to ignore the latest market developments regarding the U.S. debt. Often called a 'ticking fiscal bomb', it has recently started raising fears about the nation's long-term economic stability and potential impact on global markets., says Kar Yong Ang, a financial market analyst at Octa the market's perception of risk regarding U.S. government debt has clearly risen. This is evident in the noticeable increase in the cost of insuring exposure to U.S. government debt over the past month. The spreads on U.S. credit default swaps (CDS)—a key measure of default risk—have reached their widest levels since the 2023 debt ceiling crisis in recent weeks (see chart below).Market stress intensified even more following Moody's downgrade and the passage of the U.S. President Donald Trump's 'One Big Beautiful Bill Act' in the House of Representatives. The bill features $3.8 trillion in tax cuts and is widely expected to worsen the federal budget deficit outlook. As a result, investors started to demand higher returns for holding long-term U.S. government bonds, pushing the yields on 20-year notes above the important 5% level on 21 Yong Ang comments:Indeed, the U.S. government actually hit its legal borrowing limit back in January and has been using special procedures to avoid exceeding it and potentially defaulting. However, these measures are expected to run out around late August or early September, at which point the government might be unable to meet all its financial of government bonds with the longest maturities have been rising sharply not just in the United States but also in Japan and the United Kingdom (UK) (see chart below). On 20 May, Japan's 20-year government bond (JGB) auction had its worst results since 2012. The demand was weak, with the bid-to-cover ratio dropping to 2.50, while the lowest accepted price was just ¥98.15, some 2% below the expected asks Kar Yong Ang, referring to BoJ plans to taper its massive bond purchase although yields on long-term JGBs have been rising since the COVID pandemic, the trend accelerated after the Bank of Japan (BoJ) moved toward monetary policy normalisation amid rising wage growth and inflation. Policy normalisation implied higher short-term rates and fewer bond purchases. Thus far, BoJ has ended its yield curve control (YCC), raised its benchmark interest rate from -0.1% to 0.5% and even embarked on quantitative tightening (QT). These factors contributed to the consistent increase in Japanese government bond yields. Today, however, the situation is complicated by additional fiscal stimulus, which could result in more government borrowing just as the BoJ prepares to slowly exit the debt markets. The Cabinet already approved a massive ¥21.9 trillion ($142 billion) economic stimulus package back in November 2024. Most recently, it approved an emergency plan to allocate ¥388 billion ($2.7 billion) from reserve funds to assist businesses and households affected by U.S. Kar Yong recent movements in the U.S., Japanese, and UK government bond markets paint a concerning picture of increasing investor unease regarding sovereign debt. From the rising cost of insuring U.S. debt and the poor reception of Japan's long-term bond auction to the near 27-year high in the UK gilt yields, a common thread of heightened risk perception is evident. As Kar Yong Ang of Octa Broker points out, factors like policy uncertainty, fiscal profligacy, and the prospect of central banks reducing their bond purchases are prompting investors to demand greater compensation for lending to Kar Yong should watch the upcoming BoJ meeting scheduled for 17 June. The BoJ will issue its regular policy rate decision and will likely announce its balance sheet reduction plan. According to MacroMicro, markets currently expect a gradual pace—around 6–7% reduction over two years. However, if the BoJ opts to speed up the process, it could put pressure on global markets___Hashtag: #Octa The issuer is solely responsible for the content of this announcement. Octa Octa is an international CFD broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and various services used by clients from 180 countries who have opened more than 52 million trading accounts. To help its clients reach their investment goals, Octa offers free educational webinars, articles, and analytical tools. The company is involved in a comprehensive network of charitable and humanitarian initiatives, including improving educational infrastructure and funding short-notice relief projects to support local communities. In Southeast Asia, Octa received the 'Best Trading Platform Malaysia 2024' and the 'Most Reliable Broker Asia 2023' awards from Brands and Business Magazine and International Global Forex Awards, respectively.
Bloomberg
3 days ago
- Business
- Bloomberg
Traders See More Bad News for US Treasury Market
It's going to get worse. That's the takeaway from traders already rattled by the rout in long-dated US Treasuries as yields continue to linger near the psychologically fraught 5% threshold. The US 30-year yield is currently hovering at 4.97% after having soared last week to 5.15%—the highest since October 2023. A JPMorgan survey released on Wednesday added emphasis to growing fears in the $29 trillion Treasury market. The poll's all-client category for outright short positions —which includes central banks, sovereign wealth funds, real money and speculative traders—has climbed to the most since around mid-February. Fueling that doubt is the US losing its last top credit score, passage in the House of a spending bill that would add trillions more to an almost $37 trillion national debt, and a steep selloff in Japan's super-long bonds (more on that below).
Bloomberg
3 days ago
- Business
- Bloomberg
Bond Traders See Treasuries Selloff Going Even Further
Traders rattled by the rout in long-dated Treasuries are turning more bearish as yields continue to oscillate around a key 5% psychological threshold. A JPMorgan Chase & Co. survey of traders released Wednesday spotlighted that investors expect the selloff to worsen, keeping yields elevated in the $29 trillion Treasury market. The survey's all-client category for outright short positions — which includes central banks, sovereign wealth funds, real money and speculative traders — has climbed to the most since around mid-February.
Free Malaysia Today
3 days ago
- Business
- Free Malaysia Today
Euro zone government bond yields edge up, auctions in focus
Plans for hefty German stimulus have boosted expectations for increased bond sales, with German 30-year yields up 44 bps so far this year. (EPA Images pic) LONDON : European government bond yields edged up today with a focus on bond sales from Germany and Spain later in the day, just as a weak Japanese government bond auction sparked a selloff in Japan's bond market that rippled out. Germany, the euro zone's benchmark bond issuer, plans to sell €2 billion of 15-year bonds and Spain is expected to sell a 10-year bond via a syndicate of banks. Signs of weak demand at bond sales in Japan and the US over the past week have returned the market's focus to high debt levels in major economies, putting upward pressure on bond yields, especially those on long-dated bonds. Long-dated Japanese government bond yields rose sharply after demand at a closely watched 40-year bond auction today dropped to its lowest level since July. That set the tone for other big debt markets, with Germany's benchmark 10-year bond yield up around 1.5 basis points at 2.54% in early trade and 30-year yields around 2 bps higher at 3.04%. When a bond's yield rises, its price falls. 'I would say that there is a global shift, that things are happening in Japan, things are happening in the US. 'Things are still happening in Germany,' said Nordea chief market strategist Jan von Gerich, referring to high debt levels and expectations for increased bond supply. 'If we look at the repricing that we've seen in Europe, that has mainly centred on German bonds,' he added. Plans for hefty German stimulus have boosted expectations for increased bond sales, with German 30-year yields up 44 bps so far this year.
Japan Times
4 days ago
- Business
- Japan Times
Ueda to observe risk of high long-term bond yields affecting shorter-term rates
Bank of Japan Gov. Kazuo Ueda has vowed to monitor the impact that rising yields on super-long bonds may have on debt with a shorter maturity, hinting at concern a day after the government signaled its intention to address growing market distress. "If super long-term interest rates fluctuate significantly, we will keep in mind the possibility that such fluctuations could affect long-term or even short- to medium-term interest rates,' Ueda said in parliament Wednesday in response to questions. The governor explained that authorities prioritize their attention on shorter term rates because they have a more direct impact on economic activity, based on the bank's past analysis. Ueda's comments come at a time of heightened concern about volatility at the long end of the bond market. Yields on 40-year Japanese government bonds rose Wednesday morning ahead of an auction of 40-year notes that is seen as a test for longer-maturity bonds amid global concerns about government spending. The challenges in Japan's bond market have been exacerbated by the central bank's rolling back its purchases, and the reluctance of institutional investors to fill the gap. Ueda's remarks Wednesday elaborate on what he said last week when he noted merely that he would watch movements carefully. The rise in yields Wednesday morning was a reversal from a day earlier, when bonds rallied following news that the Finance Ministry conducted hearings on bond issuance ahead of its talks with market participants next month. Yields on the 40-year maturity fell 25 basis points on notions the ministry may be prepared to adjust debt issuance to ease the turmoil. The moves in Japan pulled yields lower on long-tenor debt from the United States to Germany, and spilled over into currency trading. Ueda's comments are likely to help assuage concerns by showing his cautiousness and the fact that he's on the same page as the government. Still, the BOJ has suggested there's a high hurdle for stepping into the market as it proceeds with the process of restoring the functioning of the bond market. The central bank inhibited that functioning through more than a decade of massive monetary easing, including the yield curve control program that ended last year. Ueda's views on the bond market are drawing more attention than usual ahead of the BOJ's review of its bond purchases at its policy meeting next month. In reference materials for BOJ hearings with market participants last week, the bank included one market opinion citing little room for the bank to address worsening of supply and demand balance for super long bond yields. That was taken as an additional hint that the bank has little appetite to take action. The Finance Ministry, in charge of the supply side of the bond market, sent a questionnaire to market participants on Monday evening that asked for their views on issuance and the current market situation, people familiar with the situation said earlier. That was unusual because of its timing and the wide group of people contacted. Finance Minister Katsunobu Kato, who spoke in parliament along with Ueda, said he's aware that market participants see concerns over fiscal conditions behind the global yield surge. "We agree that enhancing long-term growth potential is crucial for managing fiscal sustainability risks and improving wages and living standards,' he said. "In Japan, we need to firmly pursue this direction.'
