U.S Yields fall in line with global markets

U.S. Treasury yields slipped on Monday after rising for more than a week, in line with weakness in European markets, as investors consolidated positions following a strong U.S. non-farm payrolls report that kept the Federal Reserve on track to raise interest rates at least once more this year.

U.S. long-dated yields, which move inversely to prices, fell for just the second time in nine days.

“This is mostly consolidation given there’s not a lot of data,” said Bruno Braizinha, interest rates strategist, at Societe Generale in New York.

“For the last couple of weeks, we have been seeing an alignment of expectations and reality and that allowed Treasuries to sell off a little bit,” he added.

The robust U.S. jobs report released last Friday, even with low wage growth, affirmed expectations that the world’s largest economy was steadily improving and supported the Fed’s tightening path. That has pushed Treasury yields higher, which have been rising anyway the last few weeks amid a round of generally solid U.S. economic data.

Braizinha believes there is still room for U.S. Treasury yields to go higher, but believes that 2.5 percent in 10-year yields would get a lot of support.

U.S. Treasuries have also been moving in tandem with global markets.

On Monday, euro-zone bond yields fell, with investors buying back bonds after a two-week sell-off. The yield on Germany’s 10-year government bond, the benchmark for the region, was headed for its biggest one-day fall in almost four weeks, down 4 basis points at 0.54 percent.

In late morning trading, benchmark 10-year Treasury yields fell to 2.374 percent, from 2.393 percent last Friday. After Friday’s jobs report, U.S. 10-year yields hit an eight-week high of 2.398 percent.

U.S. 30-year yields slid to 2.927 percent, from 2.935 percent last Friday. They hit a more than six-week peak of 2.943 percent after the U.S. jobs data.

On the front-end of the curve, U.S. two-year yields slipped to 1.391 percent, from Friday’s 1.407 percent.

The U.S. Treasury this week will auction a combined $56 billion in notes and bonds: selling $24 billion in three-year notes on Tuesday, $20 billion in reopened 10-year notes on Wednesday, and $12 billion in opened 30-year bonds on Thursday.

Reuters

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell