Bond Yields Surge

US stock markets closed higher overnight with the Dow Jones gaining 0.41%. The Nasdaq 100 closed flat as Intel (INTC) stock fell due to revelations that the patch to fix the security vulnerability in its chips will cause significant reductions in processor performance. INTC stock was down 2.5%.

US bond yields rose substantially overnight with the 10-year yield reaching 2.55%, the high point since March 2017. If the yield exceeds 2.62% it would be a new 3.5 year high. Similarly, the Australian 10-year bond yield rose by 8 basis points overnight, a large one-day move. Monitoring bond yields is important for those with interest rate exposure as higher government bond yields will inevitably lead to higher interest rates in other parts of the economy (e.g. mortgage rates).

Crude oil prices continue their march upwards, reaching levels not seen since 2014. The extension of the OPEC agreement, high levels of compliance by OPEC members and declining inventories are all helping to drive the price higher. WTI oil is currently trading at US$63.39 and as a result, oil producers worldwide are benefiting from the higher prices. Unofficial inventory data released this morning showed another huge crude inventory draw which marks the eighth straight week of inventory draws. The official Department of Energy inventory data is due to be released tomorrow.

Chinese CPI and PPI data will be released today with the CPI expected to show that consumer prices have risen by just 1.9% year over year. 

Data Releases:

–    China CPI & PPI 12:30pm AEDT

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This article was written by William O'Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.