Global government bond prices slumped for a third straight day Thursday, while the dollar fell against several developed-market currencies, as investors continued to digest messages from central banks signaling the end of easy-money policies.
Investors dumped U.S. Treasurys and European bonds Thursday morning, sending yields on many securities to their highest levels in more than a month. Meanwhile, the euro, British pound and Canadian dollar logged further gains against the U.S. dollar after rising sharply earlier this week.
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The moves follow a raft of comments from some of the world's largest central banks pointing to a reduction of the extraordinary stimulus measures that have underpinned global markets in the years after the financial crisis.
"The time is approaching when the [Federal Reserve] will no longer be the only major central bank in tightening mode," foreign-exchange strategists at BNP Paribas SA wrote in a note to clients Thursday.
Still, investors say the communications from central banks have at times been muddled and confusing, leaving many debating how far the current market moves can go. Global investors are still working through the implications of the change in tone from central banks.
The euro rose for a third straight day against the dollar. It was up 0.4% recently at $1.1420 -- levels not seen in over a year. The British pound and the Canadian dollar rose against the buck after both notching large gains on Wednesday, up 0.4% and 0.1% respectively in early European morning trade.
The yield on the 10-year Treasury note rose to 2.245% from 2.223% on Wednesday, according to Tradeweb, on track for its highest close since late May. Eurozone and U.K. government bond yields also climbed.
The market moves started on Tuesday when European Central Bank President Mario Draghi acknowledged a "strengthening and broadening" economic recovery in the eurozone.
Many investors interpreted that as a sign the central bank was preparing to trim its EUR2.3 trillion ($2.62 trillion) bond-buying program, which has boosted asset prices and helped push down the euro in recent years. Bond yields across the developed world jumped as investors sold these assets, and the euro rocketed.
Speaking Wednesday at the same conference in Portugal, the chiefs of the Bank of Canada and Bank of England both suggested they'd be reducing monetary stimulus in the form of raising interest rates. The Canadian dollar and British pound spiked in response, and local bond yields headed higher.
The gyrations mark a sharp turnaround for developed market bonds. The yield on the 10-year Treasury note fell to 2.135% on Monday--its lowest level since November--amid expectations that tepid inflation in much of the developed world would deter central bankers from tightening monetary policy too quickly.
Many investors are still at odds as to how aggressive central banks will be in unwinding their stimulus measures of ultralow interest rates and large-scale asset purchases.
Top ECB officials left investors with mixed impressions Wednesday about when the central bank would reel in its massive bond buying, which is currently slated to continue at least until the end of 2017. The euro briefly plunged Wednesday after Vítor Constâncio, the ECB's vice president, suggested investors might have overreacted to Mr. Draghi's comments.
The euro then recovered after Mr. Draghi repeated his positive outlook for the eurozone economy in comments later Wednesday.
"Central bank rhetoric has bond markets in a spin," strategists at Société Générale wrote in a note to clients Thursday.
This week's moves recall other so-called taper tantrums, when markets have tried to pre-empt central banks' scaling back their stimulus measures by selling bonds.
In 2013, the yield on the 10-year Treasury note jumped and emerging markets fell after the Federal Reserve raised the prospect of slowing its bond purchases, which eventually ended in October 2014.
But yields have risen before only to fall back again. The 10-year Treasury yield briefly rose above 3% in late 2013, but hit a record low of 1.366% last July.
Write to Christopher Whittall at firstname.lastname@example.org
The euro was recently up 0.3% at $1.1415. "Global Bond Selloff Deepens Amid Hints at End of Stimulus--Update," published at 1303 GMT, incorrectly said the currency was at $1.397.
(END) Dow Jones Newswires
June 29, 2017 10:17 ET (14:17 GMT)