Bonds: Yields challenge equity valuations – BBH

FXStreet Insights Team FXStreet

Brown Brothers Harriman’s Elias Haddad notes that rising global bond yields, driven by a rebound in Oil prices and uncertainty around US-Iran talks, are making Treasuries more attractive than equities. The S&P500 earnings yield has fallen below the 10-year Treasury yield, leaving equity valuations harder to justify and supporting a relative shift toward bonds.

Rising yields favor fixed income

"The rebound in crude oil prices is pushing global bond yields higher as the path to US-Iran talks remains uncertain."

"Meanwhile, the renewed bond market selloff is leaving equity valuations harder to justify."

"The S&P500 current earnings yield has fallen further below the 10-year Treasury yield, making Treasuries increasingly attractive relative to stocks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD defends 0.7000 ahead of RBA on Tuesday

AUD/USD is defending 0.7000 at the start of a new week, trading near its lowest level since August 4 amid a bullish US Dollar. US yields hold near multi-year highs amid inflation risks from higher oil prices and rising bets on an October Fed rate hike. This, along with the US-Iran standoff, continues to underpin the safe-haven buck and weigh on the pair ahead of Tuesday's RBA policy announcements.

USD/JPY climbs back toward 158.00 after BoJ minutes amid firm USD

USD/JPY finds dip-buyers and reverses part of Friday's slide driven by speculation that authorities will step in again to prop up the Japanese Yen. However, the BoJ's dovish Minutes cap the JPY. Meanwhile, the US Dollar regains traction as the US-Iran standoff supports crude oil prices, fueling inflation fears and reaffirming bets for an October Fed rate hike. This further supports the pair, driving it back toward 158.00.

Gold tumbles further; focus shifts to $4,100

Gold kicks in the week on the back foot, selling off to the vicinity of the $4,100 mark per troy ounce, levels last traded back in early August. The resurgence of geopolitical concerns in combination with the firmer US Dollar and rising US Treasury yields keep the yellow metal under heavy pressure on Monday.

Bitcoin dips as ETF inflows meet Fed headwinds

Bitcoin trades below $82,800 at the time of writing on Monday after gaining over 4% last week, with the rally losing momentum near recent highs. Strong institutional demand, supported by spot Bitcoin Exchange Traded Fund inflows, continues to drive demand.

The week ahead: A key moment for the global economy as threats rise

UK diesel hits a record, as economic concerns rise. The market expects an aggressive Fed rate hiking cycle, but is it necessary? Oil supply concerns ease, even as oil prices rise. What’s next for the AI trade.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.