Following positive economic reports in both the US and Europe, which strengthened the notion that major central banks will hold off on raising interest rates in order to avoid a recession, stocks increased while bond yields decreased.
Since June, the S&P 500 has increased by 1.1%. With attention on Nvidia's earnings, technology drove the market higher. The yields on US Treasury securities with a two-year maturity, which are more vulnerable to impending policy changes, fell below 5% as statistics revealed that American corporate activity barely increased due to muted consumer demand. As the euro area's private sector activity continued to shrink, so did the 10-year German rate.
Mortgage applications in the US fell to a level not seen in over three decades, which is another important economic indication. Separate data revealed that new home sales increased to their highest level in over a year, with the supply of homes for sale in the secondary market being severely constrained by rising mortgage rates. Traders also took into consideration a US government data stating that the number of jobs added in the year leading up to March will likely be reduced downward by 306,000, a lesser decrease than some economists had predicted.
Technical aspects were also cited as a reason for the bond price increase on Wednesday. It follows a recent sell-off in Treasury securities that raised 10-year yields to their highest level since late 2007 amid speculation that interest rates would rise further to combat inflation, even if the Fed decides to halt its rate hike programme in September.
After authorities raised borrowing costs to their highest level in 22 years last month, the market is eagerly awaiting Jerome Powell's address on Friday at the Jackson Hole Economic Policy Symposium of the Kansas City Fed for hints on the direction of policy.
