Should we be worried about US yields?
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Why are US Treasury yields rising and should investors be concerned?
Should we be worried about US yields? They are getting higher, particularly at the long end of the curve. What is that telling us? Is some of it concern about rising US debt? We've talked about it before, uh, many times, in fact, in the past. But now, Steve Manushin, former Secretary to the Treasury, says he sees government debt as a bigger worry than the trade gap. Bad news on UK inflation as well, even worse than expected, and no one was expecting it to be good news. Plus, some more thoughts on the RB. This week. It's a day to compare and contrast the US and European economies as well with PMI Z out today. And Budget Day in New Zealand is Thursday, the 22nd of May 2025. It's the morning call from NAB.
Good morning. Well, uh pretty big falls in US equities this morning. Down one point nine percent for the Dow, one point seven percent for the SP and one point four percent for the Nasdaq. In Europe, well shares were mixed. The DACs closed down up, I should say, not point four percent. The FTSE was pretty flat, the CACCARANT down though, naught point four percent. Bond yields have a bit to do with the uh the moves we've seen in the United States because ten year treasuries are up ten basis points, the same for thirty years. Whereas in Europe, well, yields are up, but only about four or five basis points. Aussie 10 years, we were up five basis points yesterday to 4.45%. Now on futures uh another five basis points to 4.5%.
So on the rise in Australia as well. Uh the US dollar is down half percent, down to 99.6 on the DXY. The Aussie is up 0.2% to just under 64.4 US cents. The pound is up 0.3%. uh 0.4% higher for the euro and oil lower today down one percent for Brent and WTI. Brent now back well below sixty-five a barrel. So Nabs Tappa Strickland is with me today. A bit to talk about. But first of all, US bond yields, I said in the introduction, should we be worried they keep on rising, uh particularly at the long end of the curve. And we had another soft auction overnight.
Probably the biggest market development overnight is that continued sell-off in the longer end of the yield curve. And when you look over a 24-hour period, the US ten year yield is up around 10 basis points, currently at around 4.59%. And uh around five to seven basis points of that 10 basis point move that we've seen over the past 24 hours really came after that relatively soft $16 billion twenty year auction there. So uh the auction did did tail. Uh so it does suggest some pretty soft demand metrics there. And that investors out there uh are requiring more more compensation um to to part with with their money to invest in US government debt. And that whole uh sell America trade, uh the dichotomy between uh rising US yields and a falling US
Dollar has reasserted itself again. And in that environment, you've also seen gold higher, you've seen Bitcoin higher, and you've seen US equities down. So you could say there's a little bit more angst about the US fiscal position. There's been no real data flow to really drive any of these moves. So I think it's more around the longer term thematic about longer term bond yields, rising fiscal deficits right around the But particularly in the US as uh the US House debates. Yeah. Well it seems it's exactly when it is
we'll we're talking about the the the the the the bill, but I mean it uh it seems quite pronounced 'cause thirty years now up to five point oh eight percent. I think that's the highest since October twenty three and it was only fleetingly uh up there back then. I mean this feels like a more sustained rise in yields. So I mean sh is this setting off alarm bells in your mind?
Oh, I think it should start to set off a few warning bells out there, particularly for r risk risk assets. Uh and also in terms of what the US uh administration is trying to achieve, in terms of uh reining in the uh trade deficit, um uh trying to cut taxes at the same time, which is effectively uh blowing out the US fiscal position again. I've seen some estimates out there that suggest the uh the deficit could first
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