Soaring UK government bond yields are not just about the UK economy | Real Time Headlines

This report comes from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open keeps investors updated on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

All eyes on U.S. jobs report
The U.S. non-farm payrolls report for December will be released later on Friday. Economists expect this to show Create 155,000 new jobsdown from 227,000 in November, and the unemployment rate remained unchanged at 4.2%. Analysts from Goldman Sachs and CitigroupHowever, I think both numbers will be worse than consensus forecasts.

U.S. markets sluggish, European markets close higher
U.S. markets were closed Thursday to honor former U.S. President Jimmy Carter. Died in late December at the age of 100. Asia Pacific market dropped on friday. Japan’s Nikkei 225 index fell about 1%, leading losses in the region, as data showed household spending fell less than expected in November. CSI 300 Index fell 1.25% after the central bank cut interest rates Suspension of bond purchases.

China’s 10-year government bond yield hits record low
China’s sovereign bonds have rebounded strongly since December, with the 10-year yield Hits all-time low this month It was down about 34 basis points, according to LSEG data. loan demand Chinese consumers and businesses have been underperforming, causing banks to rush into government bonds, putting pressure on yields.

Fed governor thinks December rate cut should be ‘final step’
Federal Reserve Board Governor Michelle Bowman said that the Federal Reserve Rate cut in December It should be the “last step in the policy readjustment phase”. This suggests that Bowman, a voting member of the Federal Open Market Committee, May oppose further cuts this year. Other Fed officials who spoke this week were more optimistic about a rate cut.

(PRO) UK small and mid-cap stocks worth buying
There may be some questions British economic strength Now. But Barclays continues to see investment opportunities in the country, listing three small and mid-cap stocks it is currently betting on, two of which have Implied upside potential exceeds 40%.

The UK government’s long-term borrowing costs are now at The highest level in the past three years. As of 6 a.m. London time, 30 years in Phnom Penh It was 5.359%, the highest level since 1998.

Yields on gilts (the UK’s fancy term for government debt such as U.S. Treasuries) soared after Tuesday’s announcement from the UK Debt Management Office be auctioned Treasury bonds worth £2.25 billion ($2.83 billion) with a maturity of 30 years.

Typically, bond yields rise as interest rates rise, and rates stay high when inflation remains stubbornly above most central banks’ 2% target.

In the UK this is a problem. overall inflation rose to 2.6% in Novembermeasured in years, growing for the second consecutive month.

To make matters worse, UK gross domestic product in October Shrink 0.1% Concerns of stagflation arise when economies struggle with high inflation and economic stagnation.

Labor Government’s Plan Higher taxes and a sharp increase in borrowing have also weighed on gilt prices, which move inversely to yields.

Also consider currency trends. Higher government bond yields typically translate into stronger currencies as their returns attract global investors, boosting demand.

this GBPHowever, despite rising gilt yields, the yuan fell against the dollar.

Taken together, these factors paint a weak picture of the economy, so investors will naturally demand higher yields if they are to borrow money from the UK government.

But we should not exaggerate the situation. Think Lizzie Truss’s disastrous “mini budget” in 2022, causing huge UK gilt selloff Yields jump within days (yields typically move at a slow pace).

During this period, U.S. 30-year Treasury bond yield About 3.5%. On Friday, the rate was at 4.9%, meaning UK gilts are keeping pace with US Treasuries, rather than spinning out of control. In other words, the recent rise in gilt yields is not necessarily due to unrest in the UK, as global bond yields, interest rates and inflation concerns remain high.

It’s always scary when a country’s financial markets experience turmoil. This may make the situation more bearable when others face the same problem.

—CNBC’s Chloe Taylor, Jenni Reid, Karen Gilchrist and Elliot Smith contributed to this report.