Bond rout goes global as summit only extends the truce

Good morning. The selloff in US Treasuries ran for a second day. The 30-year yield rose to its highest since 2004, in the low-to-mid 5% range, and the 10-year pushed back above 5%. UK gilt yields neared a 19-year high too, so the rout is spreading worldwide. Most voices on Wall Street call it a wake-up call rather than a crisis.

This time it is an overheating economy, more than inflation, driving yields up. September PMIs showed the strongest expansion since July 2021, and weekly jobless claims fell to 197,000. Fed officials chimed in: Philadelphia's Anna Paulson said modest further hikes may be needed and New York's John Williams called one more hike this year reasonable.

Stocks slipped without any big drama. The Dow fell for a third day, down 162 points to 51,349, and Nasdaq 100 futures were off more than 1% at one point before the open. Large caps are holding up while small caps, like the Russell index, took the brunt of the bond selloff. The 30-year mortgage rate also topped 7% for the first time in a while, adding to pressure on housing.

The much-watched Trump-Xi summit ended with the trade truce extended by two months, to January 10. Tariff rates and China's rare-earth commitments stay as they are, and China did not sign the AI hotline the US proposed. Meanwhile oil rose again as Iran said it will keep Hormuz closed until sanctions end and Houthis attacked Saudi Arabia.