Rising bond yields could affect equities
Rising bond yields could aff...
Subscribe to Newsletter

Rising bond yields could affect equities

27 September 2021
3248
2 min.
4
Rising bond yields could affect equities

Bond yields continue to rise

Bond yields rose sharply last week and market experts see preconditions for a further rise. This will not necessarily be reflected in a fall in the stock market, but analysts point to opposite reactions of equities, depending on the sector.

Last week the yield on 10-year US Treasuries rose sharply to 1.46% on Friday from a low of 1.3% the previous week.

Some experts noted that a further rise would follow above the 1.38% yield level, a key support level of the past few months. Bond prices and yields are moving inversely.

Bay Crest Partners expert Jonathan Krinsky sees this as "the start of a new trading range" and predicts that 10-year bond yields will reach 1.6%.

Last week the Fed raised its inflation forecasts and predicted a central bank rate hike as early as next year.

According to the St Louis Fed, market inflation expectations for the next 10 years currently stand at 2.34%, which is another reason why 10-year Treasury yields could probably rise further.

Borrowing costs are expected to rise as yields rise. This is bad news for growth stocks, which have relied on low borrowing costs to finance hiring, innovation and acquisitions.

Higher treasury yields could also reduce the rate of corporate share buybacks among large companies, such as Apple (AAPL). This, in turn, will cause slower growth in annual earnings per share.

Higher earnings will have a positive effect on shares in financial companies, banks and the oil sector. Since 10-year bond yields started rising this week, the S&P 500 Index has gained just 0.51%, while sector ETFs have risen more significantly: the SPDR S&P Bank (KBE) exchange-traded fund by 5.6% and the SPDR Energy Select Sector (XLE) exchange-traded fund by 7.7% in the same time frame. Small-cap companies can also benefit as their returns are less dependent on borrowing. The Russell 2000 small-cap stock index rose 3%, outperforming the S&P 500 by 2.5%.

Persons1 and Companies3 in the news

Chief Market Technician at Bay Crest Partners
1 place
Apple
3 place
Section:
Rating companies
Instagram
16 Mention
Tesla
14 Mention
Netflix
13 Mention
Ford Motor Company
11 Mention
JP Morgan Chase
10 Mention
Amazon
9 Mention
White House
8 Mention

NEW YORK NEWS

News from GlobalNY.biz is the freshest and most relevant information about high-profile events in the region. The task of the resource's news feed is to convey to readers with maximum accuracy and objectivity information about important events in business, politics, economy, healthcare, culture and other spheres of life in New York.
GlobalNY.biz news is a coverage of economic processes taking place in New York, the latest news of public life, incidents and an overview of political events. New York news is information about the activities of small and medium-sized businesses, the work of housing and communal services and utilities, the implementation of significant projects.
The site's journalists describe not only the life of the region, but also talk about the current state of the US economy. Everything you need to know about innovations in the field of industry and agriculture, economy and power is collected in the "News" section at GlobalNY.biz.
New York news quickly informs the reader, shows the real picture and opens up hot topics. Communication with government structures and business enables us to provide our readers with reliable, information-rich material. The main page of the portal contains the key news of New York!
Alena Potapova

Development Director
Population
8127237823
Died this year
24255789
Born this year
59673534