By Dhara Ranasinghe
LONDON, March 28 (Reuters) – Growing fears of accelerating inflation and rising interest rates sent U.S. and European bond yields hitting new highs on Monday, while the yen headed for its highest daily drop since 2020.
* Global stocks were broadly flat, holding off another brutal sell-off in major bond markets.
* The return on the 10-year Treasury asset exceeds 2.5% for the first time since 2019; that of Dutch and Belgian two-year notes turned positive for the first time since 2014; and that of the Japanese defied local central bank intervention to hit new six-year highs.
* After the Bank of Japan tightened its super-loose monetary policy by offering to buy as many bonds as needed to keep 10-year yields below 0.25%, the yen weakened more than 1.5% against the dollar.
* The lockdown of the Chinese financial center of Shanghai to contain the increase in cases of COVID-19 weighed on Chinese stocks. Crude prices fell around $6 by 1142 GMT as investors anticipated weaker demand from the world’s second-largest economy.
* The weakness in energy prices helped lift European stocks, although Japan’s Nikkei lost 0.7% and US stock futures were mixed.
* MSCI’s world stock index was flat, holding up in the face of a radically tougher Federal Reserve and rising bond yields.
* Expectations that the Fed will push harder and faster to tame inflation pushed the two-year bond yield to its highest since early 2019, at 2.41%.
* The return on 10-year notes also hit new highs above 2.5% and the yield curve between 5-year and 30-year notes inverted for the first time since 2006, in a sign growth concerns are easing. growing.
* “My feeling is that the long end of the curve indicates slower growth (rather than a recession) is coming,” said Colin Asher, chief economist at Mizuho.
* In the foreign exchange market, the dollar hit a 2015 day high against its Japanese pair at 125.10 yen, a gain of nearly 8% for the month. The euro has lost about 2.3% against the greenback in the same period, but at $1.0979 it was trading above a recent two-year low of $1.0804.
* In commodity markets, gold was down and 1.35% at $1,931 an ounce.
(Additional reporting by Sujata Rao in London and Wayne Cole in Sydney; Spanish editing by Carlos Serrano)