United States markets still fear four interest rate hikes

Dollar climbs as US 10-year bond yield flirts with 3 percent

The move propelled the 10-year yield above 3 percent to its highest since January 2014 and steepened the yield curve from its flattest level in more than a decade last week, Reuters data showed. Bond yields continue to rise and the 10-year Treasury note reached 3 percent for the first time in more than four years.

It's the latest manifestation of the tug-of-war between stocks and bonds that's already been evident this year. Not being able to sell bonds is part of what sunk Toys R' Us, for example.

This week the gap between US and German 10-year government bond yields has hit its widest in 29 years and the US-Japanese 10-year yield spread reached its broadest in almost 11 years.

Betting on two more Fed hikes this year, Bishop believes the bank will likely be closely following the first reading of first-quarter GDP on Friday (27 April). Bond yield are rising globally too as Europe's economy is strengthening and China and India maintain to register strong growth. This could also mean that money starts flowing out of stocks and into fixed income.

He explained: "This path towards higher yields can be stopped in its tracks if we see a meaningful sell-off in risk assets (such as the early February equity rout), in the absence of which we would expect yields to continue to creep higher". "The rise in USA interest rates has come as traders increasingly start to price in four interest-rate hikes in 2018 from the Federal Reserve, rather than the three signaled by policymakers".

The yield on the 10-year note is a barometer for mortgage rates and other types of loans. The yield on the 10-year Treasury note continued to trade at four-year highs, rising to 2.98 percent from 2.96 percent. The euro fell below $1.22, down 0.4%. Yields have also risen at the short end of the curve, with the U.S. 2-year yield having reached a high of 2.483 per cent this week, the highest since September 2008.

Investors aren't reading much into the price action since it looks like it was all short-covering, fueled by a successful defense of the previous main bottom at $1322.60. Commodity-driven inflation could also lead to a faster pace of monetary tightening which would disproportionately harm emerging markets, according to Per Hammarlund, chief emerging-markets strategist at SEB in Stockholm. In particular, the spread between two- and 10-year US Treasury yields is very narrow, although it has increased slightly in recent days with the rise in the 10-year yield.

One group that does stand to benefit from higher yields is savers.

Walmart fell 1 percent after Bloomberg reported that the retailer might spend $12 billion to buy the majority of Indian e-commerce company FlipKart. Given current inflationary expectations, a market adjustment of the TIPS yield to a historical relationship could produce a substantial increase in the nominal 10-year yield.

"Based on interest rates, prices should be lower", said Capital Economics analyst Simona Gambarini.

United States gold futures eased 0.2 per cent to $1,330.60 per ounce.

"When everyone has been talking about whether higher rates impact the economy, the more important thing is how it will impact leverage", Maley said by phone.

Debt in New York Stock Exchange margin accounts is the highest on record, yet the measure necessarily rises when the value of stocks-which are used as underlying collateral-rises.

But the biggest worry is that higher bond yields could be signalling higher inflation and that higher interest rates are coming. "But if we have a slow drift higher, I don't see any reason why it has to be a headwind".

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