Treasury yields climb again

The trend of rising yields showed no sign of abating. For the seventh straight week, the benchmark 10-year U.S. Treasury yield (H15T10Y Index) rose from 3.19% to 3.31%, after Fed officials reiterated the need to tighten monetary policy measures to fight red-hot inflation. The 10-year T-note has already lost more than 15% of its value since the beginning of the year. The yield on the benchmark 2-year T-note, meanwhile, rose by 16 basis points to 3.56%, hitting its highest level since 2007.

In the wake of the U.S. Treasuries, the 10-year Bund yield (GDBR10 Index) jumped to +1.70% (+17 basis points) while the French OAT yield closed at 2.27%, after approaching the over 8-year high of 2.4% touched in June.

Against this backdrop, investment grade corporate bonds extended their losing streak to six weeks: -0.34% in Europe (IB8A Index) , and -0.42% in the U.S. (LGCPTRUU Index) bringing their year-to-date performance to -17.03% (i.e., worse than that of the S&P 500). By contrast, high-yield bonds gained 1.46% in the U.S. (IBXXHYCT Index; -8.09% YTD) and 0.54% in Europe (IBOXXMJA Index; -10.36% YTD). 

Emerging debt (BLCNTRUU Index) edged up 0.37% (-16.60% for the year in local currencies) amid a weaker dollar. The U.S. Dollar Index, which measures the greenback against a basket of six peers, fell below the 109 thresholds (-0.5%).