In a new burst of selling in bonds, the 10-year Treasury yield rose well above 3% on Thursday, a day after Federal Reserve Chairman Jerome Powell appeared to calm markets by downplaying the possibilities of a rate hike in the near future. In the U.S. trading session, Treasury yields, which rose when bond prices declined, began climbing early and kept climbing. This contributed to sharp declines in the stock market, which had rallied earlier in the week. The decrease is the latest in a series of downward trends that have affected many assets, from relatively safe corporate bonds to speculative investments such as cryptocurrencies and shares in non-profitable technology companies.
The increasing yields on Treasury securities, which are heavily influenced by expectations regarding future Fed policy, increase borrowing costs throughout the economy. In addition, they may decrease the value that investors place on the future earnings of riskier stocks, thereby reducing their demand. Mohit Bajaj, director of ETF trading solutions at WallachBeth Capital, observed that as the bond crisis deepened, investors shifted from long-term corporate bonds and junk bonds to less risky forms of debt. SPDR Portfolio Long Term Corporate Bond ETF fell 2.7%, its worst one-day decline since the pandemic-induced market sell-off on March 19, 2020. The iShares High Yield Bond Factor ETF declined 1.9%, its worst one-day performance since June 11, 2020.