Markets Overview
- ASX SPI 200 futures up 0.1% to 7,047.00
- Dow Average up 2.1% to 33,320.16
- Aussie up 0.7% to 0.7317 per US$
- U.S. 10-year yield rose 10.1bps to 1.9479%
- Australia 3-year bond yield rose 8bps to 1.74%
- Australia 10-year bond yield rose 9bps to 2.32%
- Gold spot down 3.1% to $1,987.91
- Brent futures down 12.4% to $112.17/bbl
Economic Events
- 10:30am: (AU) Australia to Sell A$1.5 Billion 105-Day Bills
- 10:30am: (AU) Australia to Sell A$1 Billion 133-Day Bills
- 11am: (AU) March Consumer Inflation Expectation, prior 4.6%
Government bonds extended their slide on Wednesday as a relentless rise in commodity prices amid the war in Ukraine reinforced the inflation challenge confronting central banks worldwide.
A drop in U.S. Treasuries was led by the front-end as traders solidified monetary tightening bets before a report due Thursday which may show U.S. inflation accelerated to a fresh four-decade high in February. Australian, British and German bonds likewise fell with focus also turning the European Central Bank’s upcoming decision.
The rally in commodity prices is coming at an inopportune time for policy makers trying to keep growth afloat while reining in inflation, with the effects particularly pronounced in Europe due to its proximity to the Russian economy. That’s raised the prospect of joint European Union issuance to avert a crisis, with German breakevens trading around a record high.
Bund yields in negative territory or 10-year U.S. Treasury yields below a level of 1.7% to 1.75% “are a sell given the inflationary pressures,” said Mohit Kumar, a strategist at Jefferies in London. “Bunds should fare poorly given the greater reliance of Germany on Russia oil and gas and the additional investment that would be needed to shift towards green energy and support any euro-wide initiative.”
Traders are betting that inflationary pressures will push central banks toward tightening cycles and are back to pricing in at least one unconventional 50 basis-point hike from the Bank of England by June, with six 25 basis-point hikes expected from the Federal Reserve by the end of 2022. Money markets are also back to pricing a quarter-point ECB hike this year.
Even in Australia, where Reserve Bank Governor Philip Lowe reiterated Wednesday that he sees room for patience on policy changes, similar instruments are pricing in five hikes for this year.
Other News
It was International Women’s Day: Companies from Spotifyto Instacart to Hershey’s were highlighting their initiatives toward gender diversity, Gwyneth Paltrow was posting on Instagram about her daughter, and a Twitter bot in the U.K. was going viral for highlighting gender pay gaps.
Then came the tweet from Bain Capital Ventures executive Stefan Cohen about how he was “privileged” to introduce the “special” team behind the firm’s new $560 million crypto fund — seven people, all men.
The backlash was swift. By the evening, the original tweet had been deleted and Cohen issued an apology.
“The mess up we had today is one of many, many reasons why it’s critical to have a diverse team to provide much needed perspective. We are sorry,” Cohen wrote. “We’re committed to hiring women, investing in women-led projects, and being a driving force in the industry for sponsoring the creativity and genius of women, non-binary people and people of color. More to come.”
The incident illustrates how much further corporate America has to go to achieve gender equality in the workplace. Women in the U.S. earn on average83% of what men make — and much of the gender pay gap is due to their under-representation in the highest paying jobs and fields. A recent report found that female top executives at S&P 500 companies made only 75% of what their male counterparts earned in 2020, the widest gap in nine years.
