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Yields on long-term U.S. government debt hit their highest level since 2008 and European stocks fell as investors grew concerned that the Federal Reserve will keep interest rates higher for longer to fight inflation.

The 10-year U.S. Treasury yield rose 0.05 percentage point to 4.31%, the highest in 15 years, as investors reacted cautiously to the minutes of the Federal Reserve’s July meeting.

The Federal Reserve raised interest rates to the highest level in 22 years and the minutes noted “significant upside risks to inflation that may require further tightening of monetary policy”. A flurry of economic data in recent months has suggested the U.S. economy remains strong even in the face of more than a year of rate hikes by the Federal Reserve.

“It doesn’t really matter whether you think the Fed will follow through with streamlined policy in the Fed minutes,” said Stephen Innes, managing partner at SPI Asset Management.

“The fact is that 10-year yields are surging, and in the strategy of a modern stock market operator, that’s bad news on multiple levels.”

The prospect of higher rates for an extended period also pushed 10-year gilt yields up 0.06 percentage point to 4.7%, the highest level since 2008. The yield on 10-year German bunds, the European regional benchmark, rose 0.05 percentage point to 2.7%. Bond yields rise as prices fall.

In the European region, the Stoxx Europe 600 fell 0.2% following an overnight sell-off on Wall Street. However, futures contracts tracking Wall Street’s S&P 500 and Nasdaq 100 rose 0.2% ahead of the New York open.

The yen inched up 0.3% to 145.96 per dollar, its weakest since November, as the gap between U.S. and Japanese government debt yields widened.

The drop took the yen below the level at which Japan’s finance ministry stepped in to support the currency last year and fueled speculation that Japan would intervene again. On Tuesday, Finance Minister Shunichi Suzuki said he was watching market movements “with a sense of urgency”.

Traders see an 87% chance the central bank will keep the federal funds rate steady at its next meeting in September, according to data compiled by Refinitiv.

How long it will take for interest rates to come back from record highs, however, is uncertain.

Chinese stocks steadied from a sharp sell-off earlier in the week, with the benchmark CSI 300 index rising 0.3%, while Hong Kong’s Hang Seng was flat.

In commodity markets, oil pared some losses after falling nearly 2% on Wednesday, with international benchmark Brent crude up 0.4% to $83.81 a barrel.


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