S&P500 Futures edges lower towards 4,400, Treasury bond yields refresh multi-year highs on banking jitters

• Market sentiment remains sour amid fears about China, US banks as traders brace for Jackson Hole.
• S&P500 Futures fade two-day rebound from the lowest level since late June, mildly offered of late.
• US 10-year Treasury bond yields jump to fresh high since 2007, 30-year JGBs print eight-year high.
• Widening difference between US-China bond yields, credit rating downgrade of US banks prod market optimism.

The risk appetite remains dicey during early Tuesday as market players struggle for clear directions ahead of this week’s central bank talks at the Jackson Hole Symposium. Apart from the pre-event anxiety, the fears about China and US banking sector, as well as the global growth, also challenge the market’s optimism.

While portraying the mood, S&P500 Futures register the first daily loss in three while fading the previous two-day rebound from a nine-week low, down 0.15% intraday to 4,405 by the press time.

More importantly, the 10-year US Treasury bond yields refresh the highest level since November 2007, to 4.36% before easing to 4.34% at the latest. Not only the US bond coupons but yields on the 30-year Japan Government Bonds (JGBs) also rose to the highest level since 2014. Additionally, the difference between the 10-year US and Chinese Treasury bond yields jump to the widest since 2007.

That said, China’s efforts to defend the post-COVID economic recovery, via a slew of stimulus measures, fail to impress market optimists and exert downside pressure on the AUD/USD pair, due to the Aussie-China trade ties.

On the other hand, the S&P Global Ratings downgrades several US banks while highlighting the negative impacts of the higher rates and a decline in deposits. It’s worth noting that Moody’s initiated such moves early in August and triggered the risk-off mood.

Elsewhere, the Federal Reserve Bank of New York unveiled its SCE Labor Market Survey results late Monday that suggested record wage expectations and could have contributed to the latest risk-off mood, as well as firmer bond yields. “The Lowest wage respondents would be willing to accept for a new job jumped to a record high of $78,645 in July, up from $72.873 a year ago,” said the findings.

It’s worth noting that a light calendar also allows the traders to pare the previous day’s cautious optimism, especially amid fresh worries about the economic recovery in China, Eurozone and the US.

Looking forward, the US Existing Home Sales for July and Richmond Fed Manufacturing Index for August will join speeches from the mid-tier Federal Reserve (Fed) officials to entertain the intraday traders.

Also read: Forex Today: US Dollar ends mixed, retains its leadership