Fear over US rates shakes markets; treasury bond impact

The superweight deflated and global stock markets fell. The shock was triggered by employment data in the United States that exceeded expectations. The figures generated a chain effect: Treasury yields hit record highs not seen in 16 years, Fears were raised that the Federal Reserve (Fed) would raise interest rates again since its restrictive policy results in an economic recession.

Yesterday, in the United States, the JOLTS survey was published, it revealed that 9.610 million job vacancies were registered in August, with an increase of 690 thousand compared to July, being the largest increase since July 2021.

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The data indicates that The economy of the neighboring country is not cooling, but what scares investors is that, because there is employment, the Fed has room to continue raising the interest rate or to keep it elevated for longer, with the aim of reducing inflation, which has been persistent and difficult to lower.

Given the expectation of high ratesthe performance of the Treasury bond continues to rise, which is generating volatility, as it can be a double-edged sword: “When the central bank (Fed) begins to raise rates, the price of the bond falls, but the yield rises. So, you buy; It is what everyone has been doing and it is what has been done in all the cycles of rate increases by central banks,” explained Amín Vera Cerda, investment director at Invala Family Office.

* Source: investing.com / Chart: Abraham Cruz

He noted that “inflation is persistent and the Fed will probably have to raise the rate and if in six or nine months there is no rate cut, the bonds that people bought will continue to fall in price and when they see that this did not work out As they expected, they are going to go out and sell and the bonds could sink very hard,” the specialist said.

Likewise, “operators fear that the monetary authorities, with their aggressive monetary policies, will end up causing the main developed economies to enter into recession,” mentioned CIBanco.

THE SUPERWEIGHT FALLS

Given these factors, The dollar strengthened and the super peso lost strength. During yesterday's day, The dollar reached 18 pesos, a level not seen since May of this year; However, the interbank exchange rate closed the session at 17.97 pesos, above the 17.66 pesos at Monday's close.

The peso was ranked as the most depreciated currency in the main exchanges. The dollar gained strength as the market has begun to discount an additional increase in the Federal Reserve's interest rate before the end of the year,” said Gabriela Siller, director of Economic Analysis at Banco Base.

BAGS, WITH LOSSES

Stock indices also had a negative day. In Mexico, the S&P/BMV IPC lost 1.74%; In the United States, the Dow Jones, the S&P 500 and the Nasdaq fell 1.29, 1.37 and 1.87%, respectively.

The main stock indices in the United States closed the day in negative territory, given the concerns unleashed by the bond market with levels not seen since 2007 and the effect of higher rates on the real estate market,” said analysts from Grupo Grupo Financiero BX+.

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