The reports out of China in particular made investors nervous, coming as they did on top of the recent adjustment by the Bank of Japan of its bond buying program helped accelerated the selloff in U.S. treasuries, with the USA 2 year yield hitting a nine year high, while the 10 year yield pushed up towards 2.6% and the highs seen last year, though they have since slipped back.
"It is very unlikely that China would slow its purchases of U.S. Treasuries to warn the Trump administration against aggressive trade measures", said Michael Hirson, a director at political risk consultant Eurasia Group.
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U.S. Treasury yields pulled back on Thursday, giving back most of their earlier advance after a solid auction for 30-year bonds. So although bond yields are low and prices are high by historical standards, the private sector is ready and waiting in the wings. One, the flow of quantitive easing bond buying stimulus from global central banks will soon turn negative (witness the Bank of Japan's decision earlier this week to taper its purchase pace). That matters less than the bond market seems to think.
Gundlach's trepidation about the bond market also extends to equities. Officials expect the process to take several years and to run quietly in the background as the USA central bank continues to cautiously raise interest rates.
As the USA market retreated from its recent record-highs, Australian shares are headed for a weaker start today.
Australian 10-year bonds rose 2.1 points to 2.74 per cent.
Gross said the days of mid-single digit returns for bond investors are likely over.
The dollar was down 1.13 percent at 111.37 yen, after touching 111.29 yen, its weakest since late November.
"Markets will be higher at the end of next year than they are right now, in my opinion, but it's going to be a little volatile getting there", Jonathan Slone, chief executive officer of CLSA Ltd., said on Bloomberg TV.
"Japanese [bond] yields have been rising and this has been reinforcing the move on the yen", Thu Lan Nguyen, a Frankfurt-based FX strategist at Commerzbank. A supply glut this week is also keeping bonds pressured, but moves have been more pronounced in Treasury markets than in European bonds. Wall St opened about 0.3% lower.
BITCOIN: Bitcoin prices gyrated, sinking about 13 percent according to website Coindesk, after South Korea's justice minister said it plans to ban crypto currency trading.
The MSCI world equity index, which tracks shares in 47 countries, was up 0.1 percent.
For Reuters" Live Markets blog on European and United Kingdom stock markets, open a news window on Reuters Eikon by pressing F9 and type in "Live Markets' in the search bar.
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