Spillover Risks.

The geezer-ization of China.

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1. Global government bond yields extended their climb to the highest levels since the financial crisis as resilient economic data dashed speculation central banks are about to halt or start reversing interest-rate hikes. US 10-year yields climbed to 4.31% Thursday, only just below last October’s peak, which was the highest since 2007. The equivalent yield on UK gilts jumped to a 15-year high, while its German counterpart rose close to the highest since 2011. Treasuries have been a key driver of the global debt selloff as resilience in the US economy defies expectations that more than five percentage points of Federal Reserve interest-rate hikes would bring on a recession. Officials at the last policy meeting remained concerned that inflation would fail to recede and that further rate increases would be needed, minutes of the meeting showed. (Source: bloomberg.com)

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2. The yield on the 10-year U.S. Treasury note hit a 15-year high, threatening steeper costs for many borrowers and raising concern on Wall Street about the potential fallout in the stock, bond and housing markets. A key benchmark for interest rates across the economy, the 10-year yield settled at 4.258%, according to Tradeweb. That was up from 4.220% Tuesday and marked its highest close since June 2008, months before the collapse of Lehman Brothers and expansive Federal Reserve policy ushered in more than a decade of historically low bond yields. The rise in yields is making investors nervous, because past surges have at times proved destabilizing for markets. (Source: wsj.com)

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3. Former US Treasury Secretary Lawrence Summers cautioned that the recent run-up in 10-year yields may have further to go, and that pressures are building to keep those benchmark rates much higher than experienced over the past two decades. “I don’t particularly see the current level of longer-term rates as any kind of peak,” Summers said on Bloomberg Television’s Wall Street Week with David Westin. Summers said that conclusion is based in part on expectations for bigger government budget deficits “to come into focus” for investors over time. (Source: bloomberg.com)

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4. A recent surge in US mortgage rates has pushed affordability to the lowest level in nearly four decades. For house hunters, waiting for any relief is a risky gamble. It’s been a hard lesson. Last year’s slowdown brought a brief respite from the price gains of the pandemic boom but that’s now vanished, with home values recovering the nearly $3 trillion they’d lost. Now, one measure of borrowing costs has climbed back up to a level last seen in 2001, and the Federal Reserve has indicated it may hike rates further, raising the risk that mortgage rates may push toward 8%.

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5. Faced with a liquidity crisis, Zhongzhi Enterprise Group will conduct a debt restructuring, the Chinese asset manager has told investors, as a deepening property sector downturn raises fears about spillover risks to the broader financial sector. Beijing-based Zhongzhi, which has sizable exposure to real estate, has stopped payment to investors in all investment products, its management told investors in a meeting on Wednesday, a video seen by Reuters showed. Zhongzhi's financial trouble is the latest challenge for Chinese authorities as they battle to contain a worsening property sector crisis and revive a faltering recovery in the world's second-largest economy. (Source: reuters.com, italics mine)

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