Market Update: US Treasury yields at one-year highs – 29.05.2013

Source: Henderson Global Investors

A number of economic data released on Tuesday provided further proof that the US economy is gaining traction. The Conference Board’s May consumer confidence figure rose to the highest level in five years, while single family home prices had their best annual gain in nearly seven years. The former set the tone in the market and safe haven assets were shed in favour of higher yielding riskier assets. US Treasuries sold off with the 10-year benchmark yield closing at 2.2%, the highest level in over a year. By the close, equities pared some of their earlier gains as markets focussed on the possibility that the Federal Reserve (Fed) could soon reduce stimulus on signs of strength in the economy (Dow Jones 0.7%, S&P 500 0.6%).

Overnight trading in Asia followed the positive sentiment earlier from Europe and later the US. While most bourses closed up; the Nikkei gained just 0.1% as it swung between gains and losses affected by the volatility in the Japanese government bond market. The Hang Seng was the underperformer, down 1.6%, weighed down by property developers. This morning in Europe stocks are down as investors are wary of the possibility that the Fed could taper its stimulus programme. At the time of writing the FTSE Eurofirst 300 had fallen 0.8% while the FTSE 100 index shed 1.1%.