Investors pushed US bond yields towards 5% for the first time since 2007 as the prospect of higher energy costs firmed up expectations that the US Federal Reserve would need to hike rates again.<\/p>\n
That dragged Australia\u2019s 10-year rate up to 5.38% and to fresh 15-year highs.<\/p>\n
The international oil benchmark, Brent crude, pushed towards US$110 a barrel, before settling at above US$108 in late Friday trade.<\/p>\n
Global oil benchmark has jumped<\/a><\/p>\n Steve Miller, an investment strategist at fund manager GSFM, said bonds were reacting to a \u201cdeadly cocktail\u201d of high oil prices, American fiscal irresponsibility, and worries around the independence of the Fed.<\/p>\n \u201cThe $5,000 promise is a great example of Trump\u2019s unwillingness to tackle the deficit, and even to make it worse for short-term political expediency. No wonder bond markets are sketchy,\u201d Miller said.<\/p>\n Tai Hui, chief market strategist for Asia-Pacific at JP Morgan Asset Management, said rising long-term borrowing rates would normally undermine stock valuations, as investors rethink the relative trade-off between the riskier sharemarket and climbing yields on safe bonds.<\/p>\n Sign up for the Breaking News Australia email<\/a><\/p>\n Evidence of this was clear on the ASX this week, where the benchmark S&P\/ASX 200 index was on track to end the week down 3% and below the level it was this time last year.<\/p>\n But Hui said ongoing optimism about the state of the global economy and, especially, the titanic boom in artificial intelligence investment was providing a tailwind for sharemarkets around the world, and especially on Wall Street.<\/p>\n Since the start of the US-Israel war on Iran<\/a> at the end of February, the US benchmark S&P 500 sharemarket index is up about 10%, against a 5% fall for the ASX 200.<\/p>\n But the Hong Kong-based Hui said the increasingly debated question among investors was at what point the steady march higher in yields begins to drive a broader and deeper switch out of stocks and into bonds.<\/p>\n \u201cWe are approaching a crossroad,\u201d he said.<\/p>\n
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