US Treasury yields rose again this week. Benchmark 10-year Treasury yield gained 6 basis points to 4.33%. Meanwhile, the two-year yields ended at 5.04%, a similar rise of 6 basis points.
Same trend in Europe with the German 10-year Bund yield at 2.68% (+7 basis points) while the yield on the French 10-year OAT closed at 3.22% (+8 basis points). The European Central Bank has bumped up its rate by 25 basis points to 4%, even as worries are growing that higher borrowing costs could help push the economy into recession. This tenth consecutive increase marked the highest level since the inception of the single currency and the quickest monetary tightening in Eurozone history. Concurrently, the central bank suggests that a maximum has been hit. The Governing Council believes that key ECB interest rates have attained levels that, if retained over a sufficiently extended period, will substantially help inflation return to its 2% target in due course, they stated.
Against this backdrop, the IBOXX € Liquid Corporates index was flat (-0.01%). In the US, the IBOXX $ Domestic Corporates index edged down 0.11%.
By contrast, high yield bonds added 0.42% in Europe (IBOXX € Liquid High Yield Index) and 0.04% in the US (Markit iBoxx USD Liquid High Yield Capped Index).
Lastly, emerging debt in local currencies gained 0.27% while the dollar index was up 0.23% to six-month highs above the 105.3 level.