US treasury yields continued to march upwards last week with Friday’s impressive job’s report providing another springboard for them to move higher. The benchmark 10-year security saw its yield reach its most elevated intraday level since November 2023, ultimately concluding the week 17 basis points (bps) higher at 4.77%. As a reminder, bond prices and their yields move in opposite directions with the recent selloff in US bonds reflective of growing uncertainty around the rate at which the Federal Reserve (Fed) could cut interest rates this year. The strength of the jobs report, which showed a significant beat in the pace of jobs creation during December, led to some market participants mulling over whether the Fed could actually raise rates, hence yields pushing higher once again. The S&P 500 shed -1.9% in dollar terms whilst the more interest rate sensitive NASDAQ declined by -2.3%, again in local currency.

In the UK, gilt yields tracked their American counterparts higher, with upwards momentum seen across the curve. Elevated borrowing costs combined with a recent bout of sterling weakness will no doubt be giving Chancellor Rachael Reeves a significant headache given the pressure it will be putting on the Government’s books. The more domestic focused FTSE 250 sank sharply last week, declining by -4.2% although the FTSE 100 added +0.3%. Elsewhere, European equities rose by +1.2% (as per the MSCI Europe ex UK index in local currency) on expectations of a European Central Bank (ECB) interest rate cut later this month. Meanwhile in Asia, the Nikkei 225 and Shanghai Composite retreated by -0.5% and -0.2% respectively (both local currency), the former on the growing view that the Bank of Japan (BoJ) could soon hike rates whilst the latter reflected persistent deflationary pressures as per the latest Consumer Price Index (CPI) and Producer Price Index (PPI) prints.

Moving to commodities, oil prices continued to push upwards with Brent Crude rising by +3.3% to $79 a barrel. It was a third straight week of gains for oil with strong demand for heating fuel providing significant support. Gold also advanced with the precious metal seeing its price increase by +1.8% to $2,692 an ounce. Uncertainty around possible policies from the incoming Trump administration has sought some investors to seek safe haven assets which has provided support for the metal in the face of higher treasury yields.

Week Ahead

Source: Workspace DataStream, 13/01/25

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