Bonds see sell-off on back of China data optimism

Bonds fell after an unexpected jump in Chinese factory data fueled optimism about the global economy.

US Treasury yields rose toward the highest since May on speculation the US Federal Reserve will raise interest rates this year as the global economy improves.

The S&P 500 Index was on pace for an almost four-month low, while European shares retreated for a seventh day amid mixed earnings reports.

Mexico’s peso tumbled after a poll showed Republican presidential candidate Donald Trump ahead of his Democrat rival, Hillary Clinton, for the first time since May. 

Gold traded near a one-month high as the dollar fell, while gasoline surged the most since 2008.

Investors have been parsing economic data to weigh whether global growth is strong enough for central banks to start shifting away from ultra-loose monetary policy.

While the Bank of Japan and the Reserve Bank of Australia both opted to keep interest rates unchanged yesterday, traders are betting the US will boost borrowing costs in December. 

The market’s pricing in only a 16% chance the Fed will raise rates at the conclusion of today’s meeting, with the odds on a December move at 73%

“Market participants have reversed the very pessimistic view about the global economy,” said Birgit Figge, a fixed-income strategist at DZ Bank in Frankfurt. 

Spain’s sovereign debt led declines in Europe, pushing the yield on 10-year bonds to a four-month high, while those in the UK earlier approached the most since it voted to leave the EU.

Yields on similar-maturity German bunds increased two basis points to 0.18%. Even after October’s rout, global bonds are still driving toward their best performance in seven years.

Mexico’s peso declined 1.1% after an ABC News- Washington Post tracking poll conducted October 27-30 showed Mr Trump with 46% of support and Ms Clinton with 45% among likely voters.

Gold gained for a fourth day, the longest run in a month.


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