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Treasury yields resume climb, keeping equities on edge

➤ Treasury yields climb to fresh seven-year highs.

➤ IMF lowers global growth outlook over trade concerns.

➤ Brent crude gains amid Hurricane Michael threat.

➤ Wall Street set to open lower.

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Global bonds continued to decline as U.S. Treasury yields pushed higher to levels last seen in 2011.

Yields on 10-year Treasurys added 2 basis points to 3.25% as of 7 a.m. ET, and some asset managers believe yields could rise to between 3.5% and 4% amid expectations of rising interest rates.

"A yield of 4% at some point in the next few months would not surprise me. Ultimately they may rise even more than that," wrote Chris Iggo, fixed-income chief investment officer at Axa Investment Managers.

"In essence, it is the unwinding of the massive bond buying from major central banks, led by the U.S., where the Federal Reserve is already on a hiking cycle, which is unnerving investors," said Fawad Razaqzada, technical analyst at Forex.com.

German Bunds fell as 10-year yields gained 2 basis points to 0.554%, while yields on U.K. Gilts with the same maturity rose 3 basis points to 1.57%. Italian government bonds sold off, with 10-year yields surging 11 basis points to 3.68%, as Italian Economy Minister Giovanni Tria presents the government's controversial spending proposals to parliament.

The global rise in yields continued to weigh on equities, with futures pointing to a lower opening on Wall Street following weak sessions in European and Asian trading.

Germany's DAX index was down 0.53%, France's CAC 40 dipped 0.31% and the FTSE 100 shed 0.27%. In Asia, the Shanghai SE Composite edged 0.17% higher, while Japan's Nikkei 225 index closed 1.32% lower.

The dollar spot index, which measures the dollar against a basket of currencies, gained 0.30% to $96.05 as yields climbed. The Japanese yen was broadly stable against the dollar, while the euro fell 0.37% and sterling depreciated 0.31%.

Elsewhere, the Pakistani rupee shed 3.3% against the dollar following reports that Pakistan will discuss a possible aid package with the International Monetary Fund to address its widening current account deficit and low foreign exchange reserves.

Separately, the IMF lowered its global growth projections through next year to 3.7%, noting that escalating trade tensions remain one of the biggest threats to sustained growth.

"This is partly why we remain cautious on emerging markets despite more attractive valuations," said strategists at ING Research, referring to the IMF's growth downgrade. "In our view, the case to turn bullish on emerging-markets [forex] isn't strong enough, due in part to the domestically focused Fed steaming ahead and continuing increasing interest rates."

The Turkish lira fell 0.15% against the dollar, while the Indian rupee lost 0.66% and the South African rand dropped 0.81%.

Brent crude oil gained 1.22% to $84.93 per barrel on the ICE Futures Exchange as offshore oil producers in the Gulf of Mexico are closing platforms and rigs in preparation for Hurricane Michael. Gold futures rose 0.13% to $1,190.10 per ounce.

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The day ahead:

8:15 a.m. ET — Canada housing starts (Econoday consensus: 210,000AR)

8:55 a.m. ET — U.S. Redbook

10 a.m. ET — U.S. Fed's Charles Evans speaks

7:50 p.m. ET — Japan machine orders

9:15 p.m. ET — U.S. Fed's John Williams speaks