World shares were broadly higher on Friday, but were set to end September with their worst quarterly performance in a year, haunted by worries over elevated interest rates.
Bond markets were broadly stable, but are also ending a torrid quarter. Euro zone government bond yields, which along with U.S. Treasury yields have hit fresh multi-year highs this week, are heading for their biggest quarterly rise in a year.
“Yields are way to high and will move lower but we’re in that gap between now and when that happens,” James Rossiter, head of global macro strategy at TD Securities in London, said.
“It feels like (10-year U.S. Treasury) yields could break up to 5% but ultimately they will move lower.”
In London trade on Friday, the 10-year U.S. Treasury yield was down 5 basis points (bps) at 4.54%, having risen to a 16-year high on Thursday.
Germany’s 10-year government bond yield, the benchmark for the euro area, fell 10 bps to 2.86% after jumping 13.5 bps the day before. It was still set to end the week up 14 bps, in its biggest weekly rise since early July.
Meanwhile, British government bonds, which also sold off sharply on Thursday, recovered.
Britain’s economic performance since the start of the COVID-19 pandemic has been stronger than expected, with faster growth than Germany or France, according to revisions to official data released on Friday.
Asian shares gained over 1% on their best day in weeks. Japan’s Nikkei closed a touch lower, while Chinese markets were closed for a holiday and are on a break next week.
Investors are on the look out for the U.S. personal consumption expenditures price index and euro-zone inflation data.