Bonds & Stocks
Wall Street grappling with a batch of corporate earnings sent stocks lower on Wednesday, with traders also keeping a close eye on the Treasury market for clues on the outlook for interest rates and the economy. In fixed income, longer-dated US government rates outpaced those in shorter-maturity securities — a process known as “bear steepening.” Treasury 30-year yields climbed nine basis points to 5.02% while those on two-year notes fell three basis points to 5.08%.
Economy
The worst selloff of longer-term Treasuries in more than four decades is putting a spotlight on the market’s biggest missing buyer: the Federal Reserve. The Fed is shrinking its portfolio of government securities at a
$720 billion annual pace, making the Treasury Department’s job of funding a near-$2 trillion federal deficit all the harder. Quantitative tightening, as the Fed’s program is known, ended earlier than officials expected the last time it was executed, and some market participants predict the same this time.
World
Qatar’s foreign minister said talks to release hostages held by Hamas are progressing well and there may be breakthroughs soon. Diplomatic efforts to avert a wider Middle East conflagration have intensified in recent days, with the French president visiting Egypt and more European leaders due in Israel as it weighs a ground invasion of Gaza.