The Dow Jones Index Plunges as US Government Bond Yields Surge
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The Dow Jones Index recorded another significant drop, with a decline of over 300 points, as it faced downwards pressure due to the surge in US government bond yields.
As of 10:30 pm Thai time, the Dow Jones Industrial Average stood at 33,042.76 points, experiencing a decrease of 390.59 points or 1.17%.
Following the release of robust US employment numbers, yields on 10-year and 30-year government bonds reached their highest levels since 2007. This upward movement was further supported by investors selling bonds amid diminishing concerns regarding government agency closures or shutdowns.
The spike in the yield on the 10-year US government bond, which serves as a reference point for determining the price of debt instruments worldwide, including US mortgage interest rates, has various repercussions. Firstly, it leaves consumers with less disposable income, subsequently reducing spending power. Moreover, the cost of mortgage loan repayments is on the rise. Additionally, companies will face heightened debt repayment costs, compelling them to curtail investments and minimize dividend payments to investors.
Investors are increasingly factoring in the possibility that the Federal Reserve (Fed) will raise interest rates before the end of 2023, potentially during either the November or December monetary policy meetings. These are the final two meetings scheduled for this year, following the release of strong US employment figures.
According to the CME Group’s latest FedWatch Tool, investors are applying 34.9% pressure on the Fed to increase interest rates by 0.25% to a range of 5.50-5.75% at the November meeting. This is in contrast to a mere 16.4% expectation registered last week.
Furthermore, investors are exerting 40.5% pressure on the Fed to raise interest rates by 0.25% to 5.50-5.75% at the December meeting, compared to 33.5% the prior week.
The US Department of Labor’s Bureau of Statistics recently released the Job Openings and Labor Turnover Survey (JOLTS) results. The survey revealed that job openings, which serve as a measure of labor market demand, increased by nearly 700,000 jobs to reach a figure of 9.61 million jobs in August. This marks the highest level since April, surpassing analysts’ estimates of 8.8 million jobs.
The JOLTS number is considered to be vital information for the Fed, as it provides insights into labor market tightness, a key factor in monetary policy and interest rate considerations.
Furthermore, the market faced additional pressure due to the strengthening of the dollar. This currency appreciation is set to impact the profits of companies listed on the stock market with foreign sources of income.
The Dollar Index, which measures the movement of the dollar against six major basket currencies, reached its highest point in 10 months today. This upward trend aligns with the surging US government bond yields.
Market participants will closely monitor the non-agricultural employment numbers expected to be released on Friday. Analysts predict a rise of 163,000 jobs in September, following an increase of 187,000 jobs in August. The unemployment rate is also anticipated to adjust to 3.7% from 3.8% in August.
The Dow Jones Index continues to fall. Most recently, it plunged more than 300 points, pressured by the surge in US government bond yields.
As of 10:30 pm Thai time, the Dow Jones Industrial Average was at 33,042.76 points, down 390.59 points or 1.17%.
Yields on US 10-year and 30-year government bonds rose to their highest levels since 2007 today after strong US employment numbers were released.
In addition, US government bond yields were supported by investors selling bonds as safe assets. After allaying concerns about government agency closures or shutdowns
The increase in the yield on the 10-year US government bond, which is the US government bond used as a reference in determining the price of debt instruments around the world. This includes US mortgage interest rates. It will cause consumers to have less money to spend. Meanwhile, the cost of paying off mortgage loans is increasing. And companies will face higher debt repayment costs. causing these companies to reduce investment and reduce dividend payments to investors
Investors are increasing their weight in anticipation that the Federal Reserve (Fed) will raise interest rates before the end of 2023, possibly at their meeting in November or December. which are the 2 remaining monetary policy meetings this year After the US revealed strong employment numbers.
The CME Group’s latest FedWatch Tool indicates that investors are putting 34.9% pressure on the Fed to raise interest rates by 0.25% to a range of 5.50-5.75% at its November meeting. After weighing just 16.4% last week.
In addition, investors pressured the Fed by 40.5% to raise interest rates by 0.25% to 5.50-5.75% at its December meeting. After weighing just 33.5% last week.
The US Department of Labor’s Bureau of Statistics released the results of the Job Openings and Labor Turnover Survey (JOLTS) They found that the number of job openings which is a measure of demand in the labor market rose by almost 700,000 jobs to 9.61 million jobs in August. This is the highest level since April. and above analysts’ estimates of 8.8 million jobs.
The JOLTS number is considered to be information in which the Fed is interested. It is seen as a measure of labor market tightness. which is a factor when considering the Fed’s monetary policy and interest rates
Moreover, the market was also under pressure strengthening the dollar. This will affect the profits of listed companies with foreign income.
The Dollar Index measures the movement of the dollar against six major basket currencies. It reached its highest level in 10 months today. This is in line with the rise in US government bond yields.
The market will keep an eye on the non-agricultural employment numbers on Friday. Although analysts predicted that employment figures increased by 163,000 jobs in September. of 187,000 jobs in August. And it is expected that the unemployment rate will adjust to 3.7% from 3.8% in August.
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