[Good Morning Stock Market] Bond Yields Fall... US Stock Market Closes Higher

On the first day of the partial resumption of short selling on the 3rd, the KOSPI index is displayed on the electronic board in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Junho Hwang] Fear of liquidity tightening is gradually rising along with inflation both domestically and internationally. As a result, concerns have increased in domestic and foreign stock markets, drawing attention to whether the market will continue its decline for the sixth consecutive trading day on the 14th. However, the New York stock market closed slightly higher as the direction of inflation and market interest rates became clearer.

On the 13th (local time), the yield on the U.S. 10-year Treasury note fell 0.03 percentage points (1.78%) from the previous trading day to 1.666%. The yield, which had risen for four consecutive trading days since the 7th, reached 1.69% the day before but declined slightly on this day.

Signals of rising inflation have strengthened, but bond yields declined amid Federal Reserve officials’ remarks that the inflation increase is temporary. The Producer Price Index (PPI) released that day also significantly exceeded market expectations. April’s PPI rose 0.6% month-over-month, surpassing the market forecast of 0.3%. Core PPI also increased by 0.7%, exceeding the expected 0.4%.

Additionally, the New York Federal Reserve suggested adjusting the maturity composition of Treasury purchases, particularly indicating plans to segment purchases toward long-term bonds. Jaekyun Ahn, a researcher at Korea Investment & Securities Research Center, said, “U.S. inflationary pressures are higher than expected, and due to a mix of base effects and temporary factors, the indicator numbers are also high. Although it is not easy to predict whether temporary factors will ease within one to two months, if the Fed increases long-term bond purchases, the upward trend in long-term interest rates may slow down.”

With differing directions for inflation and bond yields, the U.S. stock market closed higher that day. While tech stocks showed strength, cryptocurrency-related stocks weakened, causing the Nasdaq to turn down during the session. Later, after the U.S. Centers for Disease Control and Prevention (CDC) announced that vaccinated individuals do not need to wear masks, expectations for economic normalization rose, leading to a higher close. On that day, the Dow Jones Industrial Average rose 433.79 points (1.29%) to 34,021.45, the S&P 500 increased 49.46 points (1.22%) to 4,112.50, and the Nasdaq rose 93.31 points (0.72%) to 13,124.99.