Will stocks withstand rising bond yields?
After five days of selling, investors will be hoping for a breather. Whether or not they get it may depend on the bond market.
Last night saw a return to the recent trend of rising bond yields and what appears to be an associated decline in the $US. Rising bond yields have been a key driver for the recent fall in stock markets as investors appear to be adjusting valuations in expectation that bond yields will continue to rise. Banks stocks have been a casualty with the Commonwealth bank down 17.5% since its peak in late March.
However, US stock markets closed relatively steadily last night withstanding further bond market selling. Australian bond yields are also higher this morning so whether our yield stocks, including the big banks, are able to hold the line in the face of this development may hold the key to whether the ASX 200 index takes a breather from recent relentless selling.
Last night also a surprisingly solid rally in oil prices. While the West Texas and Brent prices are both still inside recent trading ranges, energy stocks may get some support today as traders react to last night’s oil rally.
For further comment from CMC Markets please call 02 8221 2137.
Frequently Asked Questions about this Article…
Rising bond yields can lead to a decline in stock markets as investors adjust valuations in anticipation of continued increases in yields. This adjustment can particularly impact sectors like banking, which have been affected recently.
Bank stocks, such as those of the Commonwealth Bank, have been declining due to rising bond yields. Investors are adjusting their valuations, leading to a decrease in stock prices for banks.
Rising bond yields have been associated with a decline in the US dollar. This trend has been observed as investors react to changes in the bond market.
The ability of Australian yield stocks, including major banks, to withstand rising bond yields is uncertain. Their performance may influence whether the ASX 200 index can take a break from recent selling trends.
Despite the pressure from rising bond yields, US stock markets closed relatively steadily, showing resilience against further bond market selling.
There was a surprisingly solid rally in oil prices, with West Texas and Brent prices remaining within recent trading ranges. This rally may provide support to energy stocks as traders react to the changes.
Energy stocks may receive some support due to the recent rally in oil prices, as traders respond to the positive movement in the oil market.
For further commentary on market trends, you can contact CMC Markets at 02 8221 2137 for more insights and analysis.
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