Global Yields Soar – Just Don’t Tell Tech Stocks

From the Desk of Ian Culley @IanCulley

Chop, chop, chop…

Yields on sovereign debt are chopping sideways across the globe.

The US, France, Germany, Spain, and UK benchmark rates are well below their respective 2023 peaks.

But in Japan, the JGB 10-year yield is hitting its highest level in over a decade. 

Check out the Japan benchmark rate cruising above 100 basis points: 

Earlier in the week, the Japan 10-year yield reached 1.10 for the first time since July 2011. 

While the Bank of Canada, the Swiss National Bank, and the European Central Bank began cutting rates this year, the Bank of Japan (BoJ) may hike later this month. 

You can blame it on a plummeting yen or the BoJ’s Yield Curve Control policies. 

Either way, it’s clear that Japan’s era of negative interest rates has ended, and the previous decade’s easy money environment no longer exits — full stop. 

Instead of contemplating when the Federal Reserve will make its first rate cut, embrace the new rising-rate regime. 

It might be uncomfortable for the seasoned tech investor. 

Fear not! The Nasdaq just hit a new all-time high. 

Elevated global yields aren’t sending your tech stocks to the gallows. They’re opening the door to incredible opportunities in the energy and materials sectors.

Like it or not, rising interest rates are inescapable – even for the Bank of Japan.

Are you taking advantage of the abundant opportunities?

Or are you letting the fear-mongers cloud your judgment?

–Ian

Countdown to FOMC

The market is pricing the probability of the first 25-basis-point rate cut for the September meeting (seven weeks before the US presidential election).

Here are the target rate probabilities based on fed funds futures:

Click the table to enlarge the view.

This data is from the CME FedWatch Tool as of July 4, 2024.

Thanks for reading.

And as always, be sure to download this week’s Bond Report!