The US bond market remains at the forefront of attention across global markets with yields continuing to rally.
The movements came following the September Federal Open Market Committee (FOMC) meeting, where the Federal Reserve unsurprisingly kept the funds rate unchanged at 5.25 to 5.5 per cent.
Federal Reserve chairman Jerome Powell noted in his post-meeting press conference that the last three inflation readings were very good and that the last jobs report was a "good example of what we want to see".
Following the meeting, markets saw US 10-year bonds hitting 4.5pc during Friday's session before closing at 4.43pc.
The rally continued through Monday this week when the US 10-year bonds hit a 16-year high of 4.55pc.
The increase in US yields continues to support the US dollar, with the US dollar Index (DXY) up 0.3 to a high for 2023, breaking 106 for the first time this year.
The DXY tracks the strength of the US dollar against a basket of major international currencies.
Overall, foreign exchange markets were mixed last week, with the New Zealand dollar rallying by 1pc while the British pound fell by 1.1pc following the Bank of England's decision to hold rates steady.
Equity markets were in decline last week, with only two of the major indices seeing positive returns. Shanghai's CSI300 was up by 0.81pc, and the New Zealand NZX 50 was up by 0.22pc.
US equities saw negative returns across the board, with the S&P500 falling by 2.93pc and the tech-heavy NASDAQ down by 3.62pc.
The Australian ASX200 also disappointed by falling 2.89pc over the week. Other international markets also struggled, with Tokyo's NIKKEI falling by 3.37pc and the Euro Stoxx 600 closing on Friday down 1.88pc.
Going forward, markets will no doubt be focused on the potential for a government shutdown in the United States.
The last government shutdown arose from Congress refusing to provide funding for President Trump's border wall.
In the week leading up to and the first day of the shutdown, the S&P500 lost almost 10pc, only to rally by 11pc in the five days leading up to the shutdown ending.
- This article does not take into account the investment objectives, financial situation or particular needs of any particular person. Before acting on any advice contained in this article, you should assess whether it is appropriate in light of your own financial circumstances or contact your financial adviser. Christopher Hindmarsh is an adviser at JBWere Limited. JBWere Limited AFSL 341162.
