Bonds surge as activity data raises recession fear - BNN Bloomberg

Investors fled into the safety of bonds and stocks wavered as a lurch toward higher interest rates together with weak euro-area activity data heightened anxiety that aggressive central bank policy will tip economies into recession.

The second-quarter stock rally is fraying under the threat of more rate hikes and fears that the full economic impact of aggressive rate increases has yet to be felt. Federal Reserve Chair Jerome Powell said the U.S. may need one or two more rate increases in 2023. A rally in European bonds sent five-year German yields plummeting as much as 16 basis points to 2.48 per cent, putting them on course for the biggest drop since April. U.S. Treasuries yields fell in sympathy, with the 10-year benchmark note shedding five basis points.

Concern about the economic outlook was reflected in a rotation into bonds and out of stocks in weekly flow data. Investors yanked US$5 billion from global equity funds in the week through Wednesday and added US$5.4 billion to bonds.

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