Bond sell-off accelerates, sending yields to “unthinkable” highs -Bloomberg

Bond markets are reckoning with the end of easy money: The sell-off in the US and European bond markets accelerated last week, pushing yields towards their highest levels in years, as the reality that interest rates are staying high over the long term sinks in, Bloomberg reports. Yields on US 10-years are inching closer towards 5%, a rate that hasn’t been seen since mid-2007, while 10-year German bunds — which were either close to or below zero for a large part of the previous decade — are at 12-year highs and approaching 3%. “The selloff has been so extreme it’s forced bullish investors to capitulate and Wall Street banks to tear up their forecasts,” the news outlet writes.

What analysts are saying: “What happened over the last few months was basically markets were wrong because they thought inflation would come down quickly and central banks would be very dovish,” one asset manager told the news outlet. “Everything will depend about how inflation lands over the medium to long run, but it’s fair to say that we have changed from the ultra low-yield regime.”

The higher the yields, the worse for Egypt: Higher yields on US treasuries put pressure on emerging-market assets such as Egyptian debt, which become less attractive to foreign investors (Egypt’s case is made worse by the fact that its real interest rates are also deeply negative due to the soaring rate of inflation). Rising yields have also helped send the USD to its highest level in 10 months, increasing Egypt’s import bill and raising debt repayments.

THE CLOSING BELL-

The EGX30 fell 0.9% at Wednesday’s close on turnover of EGP 2.1 bn (0.6% below the 90-day average). Local investors were net buyers. The index is up 38.2% YTD.

In the green: Orascom Construction (+3.7%), AMOC (+3.1%), and Palm Hills Developments (+2.9%).

In the red: Fawry (-4.1%), Juhayna (-4.0%), and Abu Qir Fertilizers (-3.6%).