Bond yields sink on recession fear; futures steady

Bond yields tumbled as comments by U.S. Federal Reserve Chair Jerome Powell and growth data in Europe stoked fear about a global downturn.

The yield on German 10-year bonds slumped as much as 21 basis points, poised for the biggest two-day decline since November 2011, after a report showed economic activity in the euro-area slowed sharply in June. US 10-year rates traded near a two-week low.

Contracts on both the U.S.-based S&P 500 and Nasdaq 100 rose after erasing earlier declines. The Stoxx Europe 600 Index pared earlier losses to trade 0.7 percent lower amid losses among miners and energy shares.

Powell accepted that steep rate increases could trigger a U.S. recession, and said the task of engineering a soft economic landing is “very challenging” in testimony to the Senate Wednesday. Policymakers are taking drastic steps to cool inflation at a four-decade high and the Fed chair repeated his resolve to get consumer price growth back down to the 2 percent target.

“The reaffirmation of the Fed’s commitment to bringing inflation down and that recession is a risk are adding to growth worries, which is the dominant fear again,” said Esty Dwek, chief investment officer at Flowbank SA.

Elswewhere, The Ghanaian and Nigerian stock exchanges opened on Thursday in positive territory as did four key indices in the Asia-Pacific region.

Global oil prices recouped some of their declines, with West Texas Intermediate rising above 105 U.S. dollars a barrel from 104.

Bitcoin rose back above 20,000 U.S. dollars while gold futures fell.