US 10-Year Bond Yield Nears Three-Year High

The Dow Jones closed lower overnight, down 0.37%, but still holds just above 26,000. The US government is currently working to avert a shutdown in government operations as lawmakers need to pass a spending bill to give the ruling party the authority to keep paying government workers. If a shutdown is triggered, most government workers (excluding those deemed essential) are told to take unpaid leave. Usually the government eventually comes to an agreement at the last minute however a shutdown did occur in 2013. Although the stock market did fall today, in general the market doesn’t seem particularly concerned about the possibility of a shutdown.  

Crypto-currency prices partially recovered from their recent slump with the bitcoin price now back at US$11,585. The rally was partially fuelled by the Chairman of the South Korean Fair Trade Commission admitting that it would be realistically impossible to shut down the cryptocurrency exchanges. The comment by South Korean officials that a shutdown of the exchanges was possible was one of the headlines that triggered the cryptocurrency sell-off in the first place.   

The US 10-year bond yield has reached 2.62%, just one basis point below a new three-year high. Rising yields at the longer end of the curve usually signal optimism about future economic growth and inflation. The flip side of this is that other interest rates in the economy would be expected to rise, increasing the costs to people with large debts. 

Data Releases:

–    UK Retail Sales 8:30pm 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.