Finimize - 📉 Bonds saw a selloff

What’s going on here?

Global bond markets took some tough hits this week, sending bond yields to serious heights.

What does this mean?

Investors aren’t loving the current reality of stubborn inflation, shaky politics, and ballooning country debt loads – so they’re putting some distance between bonds and their portfolios. As a result, bond prices have sharply slid and their opposite-moving yields have duly climbed. US Treasury yields are now brushing up against a steep 5%, UK gilt yields are at their loftiest since 2008, and even Japan’s famously slim ones have hit a decade-high of over 1.1%. Here’s the deal: rising yields can mean an economy is holding steady, but they can also flash warning signs about the long-term outlook for inflation and interest rates. And if you zoom out, it looks like we’ve hit a turning point. After decades of falling interest rates, we may now be in an era of “higher-for-longer” lending costs.

Why should I care?

For markets: No bueno for stocks.

When bond yields rise, stock investors tend to get anxious. And when longer-dated bond yields climb faster than shorter-term ones – a.k.a. “a steepening curve” – that’s often even worse for stocks. So keep a close eye on those yield percentages: if they keep moving upward, the S&P 500 rally might be seriously tested.

The bigger picture: Risks and rewards.

Bonds may be stumbling, but gold and bitcoin have been on a winning streak in recent months. That shows how investors are worried about governments struggling with massive debt loads turning to extreme financial measures – ones that can fuel inflation and weaken traditional currencies. But there’s a silver lining here. With yields high again, bonds could finally offer enough return to make those risks seem worthwhile. So don’t count these assets out just yet – they may be ripe for a comeback.

What’s going on here?

Two UK grocery giants delivered some festive quarterly news on Thursday, hinting that the country’s victory over inflation might finally be in the bag.

What does this mean?

Tesco – which commands almost a third of Britain’s grocery market – posted “like-for-like” sales growth of almost 4% during the holiday season. And with overall sales growth of almost 3% in the quarter, the company said it’s on track to serve up the annual profit it promised earlier last year. The more upscale Marks & Spencer, meanwhile, had a record-breaking mince-pie-and-figgy-pudding period, with its biggest single day of food sales ever. That contributed to almost 9% sales growth for the category and 6% sales growth for the firm overall.

Why should I care?

For you personally: Happier New Year.

The sweet treats are in the details. Tesco noted that sales volumes were the biggest driver of its revenue growth in the latest quarter – and that means the company wasn’t aggressively hiking prices. In fact, the supermarket chain said it cut the price of a traditional Christmas meal by 12%. And that’s something. Uncomfortably fast inflation has been a feature of life for the past two years, with everything from nice-to-haves to the essentials getting more expensive by the month, so this news suggests a long-awaited shift. If the biggest grocery chain in the UK is finally turning a corner on price increases, it probably won’t be long before its rivals follow suit. And with the latest data showing workers’ wages growing at twice the pace of inflation, Brits just might have a little more money left over at the end of the month. Cheers to that.