Global bond yields declined sharply on Friday, with that on the 10-year US Treasury note dropping to the 3.7% level as concerns that higher interest rates could cause a recession outweighed the opportunity cost of government bonds. The developments took place after Federal Reserve Chair Powell emphasized that FOMC members believe that the funds rate must continue to increase to bring inflation down, despite recent data underscoring the negative impact of a tighter monetary setting. The latest PMI figures showed that the US manufacturing sector contracted faster than expected in June, while services growth slowed. In the meantime, initial jobless claims have persistently surpassed market forecasts and stand at 2021 highs. Elsewhere, German’s 10-year Bund yield, the benchmark for Europe, fell to 2.3%, the yield on the UK 10-year Gilt went down to 2.7%, and that on Canadian 10-year bonds sank to 3.3%.
