[US market conditions]Government bond yields surge, stocks fall sharply-rate hike pace accelerated observation-Bloomberg

The US stock market fell sharply on the 10th. US Treasury yields have skyrocketed. St. Louis Federal Reserve Bank of St. Louis Governor Bullard called for an accelerated pace of rate hikes after the US Consumer Price Index (CPI) rose for the first time in 40 years in January.

Accelerating to 7.5% rise in US consumer prices-Growth rate for the first time in 40 years, exceeding expectations (3)

Governor Bullard supports a big rate hike-a total of 1 point by July 1 (2)

In the US Treasury market, 2-year bond yields surged 27 basis points (bp, 1bp = 0.01%) at one point. January’s CPI rose 7.5% year-on-year. Governor Bullard said he would support a total policy rate hike of one point by July 1.

The S & P 500 Index is 4504.08, down 1.8% from the previous day. The Dow Jones Industrial Average is down $ 526.47 (1.5%) to $ 35241.59. The Nasdaq Composite Index is down 2.1%. The Nasdaq 100 index, which is centered on large tech stocks, fell 2.3%.

As of 4:20 pm New York time, 10-year bond yields have risen 11 basis points (bp, 1bp = 0.01%) to 2.05%. Two-year bond yields rose 25bp to 1.61%.

Expect at least one US rate hike by 0.5 points-money market

“Even if one of the FOMC participants speaks, the committee does not necessarily act,” said Chris Low, chief economist at FHN Financial. “But the odds of a 0.5-point rate hike in March or May are high if the market expects it. Mr. Bullard is well aware of this and is consistent with his sense of urgency following the CPI this morning. It is likely that the federal funds (FF) interest rate futures market has been encouraged to do so. If he can do so, the FOMC is even more likely to act. “

The dollar index remains almost unchanged in the foreign exchange market. The movement of the short cover was involved in the CPI and President Bullard’s remarks, and it fluctuated during the day. The yen temporarily fell near the lowest price since January 2017, and then narrowed down.

The Bloomberg Dollar Spot Index, which shows the movement of the dollar against the 10 major currencies, rose 0.2%. As of 4:21 pm New York time, the dollar is up 0.5% against the yen to 1 dollar = 116.09 yen. At one point, the price rose to 116.34 yen. The euro is almost unchanged against the dollar, 1 euro = 1.1424 dollars.

The New York crude oil futures market continues to grow slightly. It was an uncertain development. As risk-off sentiment spread throughout the market, commodities as inflation hedges have been bought for escape.

“Inflation is generally a good time for commodities,” said Stewart Glickman, energy equity analyst at CFRA Research. “Crude oil as a physical commodity has excellent value preservation. Crude oil and gold are now considered to be safer as escape destinations,” he analyzed.

The New York Mercantile Exchange (NYMEX) West Texas Intermediate (WTI) futures March contract ends at $ 89.88 a barrel, 22 cents (0.3%) higher than yesterday. The North Sea Brent April contract for the London ICE is down 14 cents to $ 91.41.

The gold market continues to grow slightly. With price statistics stronger than expected, there were widespread observations of accelerating rate hikes, even near the highs for the first time in two weeks.

“The CPI shock has pushed up real yields and the dollar, and the gold market has shown a typical reaction,” said Ole Hansen, chief of commodity strategy at Saxo Bank. “We are chasing inflation like a runaway train. Inflation runs the risk of becoming more aggressive until the economy slows. Stagflation is a tailwind for gold,” the US financial official said.