Macro Insights

September 2023 Wrap-up: Bond sell-off accelerates as Fed ponders higher rates

1 October 2023

Author: Griffin Tory

September saw a continuation of recent market trends, with the US 10-year Treasury yield hitting its highest level since August 2007. The move coincided with increasing talk of “higher-for-longer” interest rates, a theme that was bolstered by the outcome of the September Federal Open Market Committee (FOMC) meeting, with Chair Powell explicitly acknowledging the possibility of higher long-run rates. This came alongside a significant improvement in the FOMC’s GDP growth projections, consistent with our own nowcast, which has been lifted by strong economic data.

The move higher in yields weighed on risk assets across the board, with global equities and high yield bonds selling off and the US dollar appreciating. Meanwhile, both the US and the Euro Area saw declining rates of core inflation. In the US, headline inflation rose on energy price pressures, as the price of oil hit a 10-month high after Saudi Arabia and Russia announced production cuts.

Against this backdrop, global equities were down -4.1%¹ in September, with developed and emerging markets declining in tandem. Global bonds fell by -2.9%², led primarily by movements in long-term real interest rates. Although this was a global phenomenon, the yield increases were notably larger in the US, causing the dollar to appreciate by +2.1%³. With UK short-term yields declining, the pound depreciated by -3.7% 4, which also boosted the pound value of UK equities. Global commodities were largely unchanged, with strong gains in energy offset by sharp declines in precious metals from currency and interest-rate movements. 

Source: Bloomberg

About the Author

Griffin Tory

Griffin Tory is a Junior Economist working within the Macro Research team. Griffin joined Fulcrum in 2022 and prior to this, worked in the Investment Strategy Group at Vanguard. He graduated with an MPhil in Economics from the University of Cambridge in 2020.

  1. Bloomberg Ticker: GDUEACWF Index
  2. Bloomberg Ticker: LEGATRUU Index
  3. Bloomberg Ticker: TWI USSP Index
  4. Bloomberg Ticker: GBP BGN Curncy

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