World shares dip as bond yields surge

LONDON (Reuters): World shares sank on Monday as expectations for faster economic growth and inflation battered bonds and boosted commodities, while rising real yields made equity valuations look more stretched in comparison.

MSCI’s All Country World Index, which tracks shares across 49 countries, was down 0.25% by midday in London.

The pan-European STOXX 600 index was down 0.6%, hitting its lowest in 10 days. Germany’s DAX and France’s CAC 40, and Britain’s FTSE 100 fell 0.5% each. Spain’s IBEX 35 index and Italy’s FTSE MIB lost 0.6% each. 

S&P 500 futures fell to their lowest since Feb. 5, down 0.85% on the day. 

Bonds have been bruised by the prospect of a stronger economic recovery and greater borrowing as President Joe Biden’s $1.9 trillion stimulus package progresses.

Yields on 10-year Treasury notes have already reached 1.38%, breaking the 1.30% level and bringing the rise for the year so far to a steep 43 basis points.

Analysts at BofA noted 30-year bonds had returned -9.4% in the year to date, the worst start since 2013.