Global Yields Extend Rise

A review of the week's top global economic and corporate news.


For the week ending 7 July 2017

  • Bond selloff intensifies
  • US hiring rebounds
  • G20 leaders meets in Hamburg
  • Italy bails out oldest bank
  • Yellen briefly hospitalized

Global equities slipped this week, pressured by rising bond yields. The yield on the US 10-year Treasury note rose 10 basis points on the week to 2.39%, while the price of West Texas Intermediate crude oil declined modestly to $44.50 a barrel from $45.40 a week ago. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), rose to 11.75 from 10.9 last week.


Central bankers prepare to take away punch bowl
William McChesney Martin, who was US Federal Reserve chairman from 1951 to 1970, famously relayed a writer's quip that the central banker’s job is to take away the punch bowl just as the party is starting to get good. This week, central bankers on both sides of the Atlantic indicated that last call might be approaching. The minutes of the June Federal Open Market Committee meeting show that some members want to begin shrinking the Fed’s nearly $4.5 trillion balance sheet as early as September. Look for potentially more detail when the Fed issues its semiannual monetary policy report to Congress today. Meanwhile, the minutes of the European Central Bank’s June meeting show that officials discussed whether to drop the bank’s promise to increase the pace of its asset purchases if needed to stimulate economic growth. While they refrained from making the change, it is expected they will do so some time in the next few months. In June, the ECB did drop its promise to cut interest rates further if necessary.

Those small shifts in tone from the central banks helped send yields higher around the globe, particularly in Europe, where benchmark German bund yields soared. The 10-year bund yield has more than doubled in recent weeks. It stands at 0.57% today, up from 0.23% in mid-June, with the bulk of the move unfolding this week. The rise in US yields was more muted, with the 10-year Treasury note adding 10 basis points in yield to stand at 2.39%. Japan’s 10-year yield was capped at 0.10% as the Bank of Japan intervened to maintain its yield curve control policy. That intervention helped weaken the country's currency amid widening yen-negative interest rate differentials.

US employment backdrop brightens
Nonfarm payrolls rose a stronger-than-expected 222,000 in June, handily beating estimates for a gain of 174,000. Upward revisions to April and May payrolls added an additional 47,000 jobs to those previously reported. Despite the solid employment gains, wage growth remains muted, Friday’s report shows. The unemployment rate rose 0.1% to 4.4% as jobseekers reentered the labor force.

Leaders gather in Hamburg
Leaders of the G-20 countries gathered in Hamburg, Germany this week for a summit amid growing tensions over North Korea’s missile program. On Thursday, Russia blocked a UN Security Council resolution on that would have further isolated North Korea. That move could lead to a tense first meeting between Russian president Vladimir Putin and US president Donald Trump. Syria will also be a major topic of discussion between the two presidents.  

Italy rescues another bank
Banca Monte dei Paschi di Siena, the world’s oldest bank, received a bailout from the Italian government this week, getting €5.8 billion in state aid. As a result, the bank will slash staff by about 20% and close 600 branches while shedding €28.6 billion in nonperforming loans over the next four years. Italy bailed out two Venice-based lenders last month. The Italian government said it believes no further state intervention in the banking sector will be required. 

Yellen on the mend
Fed chair Janet Yellen was released from a London hospital on Monday after spending the weekend being treated for an infection, the Fed said. Yellen, 70, whose term is scheduled to end in February 2018, also received medical attention for dehydration in September 2015 following a speech in Amherst, Massachusetts. 





Mon 10 Jul


Consumer and wholesale inflation report

Wed 12 Jul

United Kingdom

Employment report

Wed 12 Jul


Industrial production

Wed12 Jul


Bank of Canada rate-setting meeting

Wed12 Jul

United States

Yellen House Financial Services Committee testimony

Thu13 Jul


Yellen Senate Banking Committee testimony

Fri14 Jul


Retail sales/Consumer Price Index/industrial production

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Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg New; Financial Times;;;

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