Falling Yields Weigh on Global Financials
11:00 AM ET 7/5/16
The major averages have ticked lower in recent trade as the Nasdaq Composite (-1.0%) trails the S&P 500 (-0.7%). The benchmark index trades two points off its session low.
The heavily-weighted financial sector (-1.6%) demonstrates broad-based weakness, trading lower in sympathy with European banking names. Credit Suisse (CS 10.36, -0.51) and Barclays PLC (BCS 7.24, -0.35) underperform as declining sovereign bond yields pressure the group. Additionally, the Bank of England startled investors when it warned of risks to commercial property and capital inflows following the results of the referendum vote.
On the home front, Dow component JPMorgan Chase (JPM 59.54, -1.72) rounds out the price-weighted index, declining 2.8%. Conversely, real estate investment trusts demonstrate relative strength, gaining as investors look to the sub-group’s dividend yield.
The Treasury complex trades near the best level of the day as the yield on the 10-yr note slips seven basis points to 1.37%. Separately, the yield on the 2-yr note has fallen four basis points to 0.55%, showing an 82 basis point differential between the yield on the 10-yr.