Market 09/21: US Dollar Index and bond yields surge together

Bond yields in various countries race to surpass peaks

Yesterday's FOMC meeting revealed the Fed's message that interest rates will remain higher for longer (read more about FOMC at here). The market immediately reacted as bond yields across maturities surged together.

1. US

• 1-year Treasury yield rises to 5.47%, highest since December 2000.

• 2-year bond yield rises to 5.12%, highest since July 2006. Two years ago, this yield was at 0.23%.

• 30-year bond yield rises to 4.5% - last seen in 2011.

• 10-year bond yield hits 16-year high - 4.486% after jobless claims data

2. Other countries

Japan's 10-year government bond yield rises to 0.74% - highest since 2013.

• Germany's 10-year bond yield rises to 2.77% - highest since 2011.

• Canada's 2-year bond yield hits 5% for the first time since July 2001.

DXY index rises near 2023 high

US Dollar Index DXY is on track for its 10th consecutive weekly gain (longest streak since 2014) and has the highest weekly close of the year.

Along with rising yields, stock markets reacted sharply. NASDAQ and S&P 500 down over 1% and Dow Jones down 0.52%.

US existing home sales endure a dismal summer

Existing home sales down 0.7% from previous month, equivalent to 15.3% decline year-over-year.

Seasonally adjusted figures drop near the lowest since 2010 (as new home sales trend upward). Only 2010 sales are lower than now.

Luxury home sales boom in the West and Northeast.

Homes for sale drop to 1.1 million, smallest August inventory since 1999. Median sales price up 3.9% from a year ago to 407,100 USD, up 46% since August 2019.

On the other hand, house prices are rising much faster than wages. Especially in Canada, while wages rose ~40%, house prices nearly tripled in 36 years.

Philly Fed September business survey plunges sharply

After unexpectedly rising in August, Philly Fed survey turns around, marking the 14th negative growth month in the past 16 months, with 29% of firms pessimistic.

New orders index falls from +16.0 last month to -10.2 this month. New shipments index drops 9 points to -3.2.

Although initial jobless claims are lower than earlier in the year, Philly Fed employment index falls for 6th straight month.

Firms report prices paid up 5 percentage points to 25.7.

24% of firms expect energy markets to worsen, while over 1/5 expect capital markets to deteriorate.

Jobless claims continue to decline

Last week's initial jobless claims fell to 201 thousand, lowest since January (unadjusted at 174 thousand, lowest since October)

Continuing claims drop below 1.7 million, lowest since January.

Other news

• Bank of England holds rates at 5.25%. Over next 12 months, BoE to reduce balance sheet by 100 billion GBP vs previous 80 billion.

• Swiss National Bank surprises by holding rates at 1.75%, against market expectations of hike to 2.0%.