A look at the day ahead in U.S. and global markets from Mike Dolan.
Although they backed up a bit first thing today, U.S. 10 and 30-year Treasury yields swooned to their lowest since mid-September on Wednesday.
At a low over the past 24 hours of 3.40%, the 30-year long bond yield has now lost a full percentage point since its 2022 peak in October. In price terms, it has gained more than 10% over the past month. Some may puzzle over why yields have plunged this week ahead another interest rate rise from the U.S. Federal Reserve next week, but 2023 recession fears - justified by the incoming data or not - are taking hold. And with the yield curve between 3-months and 10 years closing at its most inverted in more than 40 years - the bond market itself is screaming a downturn is coming.
Three spurs to the move came on Wednesday. The first was plunge in Brent crude oil prices to the lowest level of year below $77 per barrel on a mix of recession fears, higher inventories and the G7's Russian oil price cap some 30% below prevailing world prices. With year-on-year oil price gains evaporating to zero, that is dragging inflation expectations down in lockstep.
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