MW: Treasury yields rebound from four-week losing streak
Treasury yields inched higher Monday morning after from a four-week decline, as investors increasingly bet that the Federal Reserve will raise interest rates for the first time in nearly a decade.
After Friday’s official jobs report underlined expectations for a interest-rate hike in the near future, the probability of a September hike increased to 54% on the week, according to data from Jefferies.
Stanley Fischer, the Fed’s vice chairman, on Monday said the central bank is concerned about low inflation and won’t raise rates before it sees inflation returning to more normal levels.
Treasury yields edged lower momentarily on the dovish comments but remained higher on the day.
The yield on the 10-year Treasury TMUBMUSD10Y, +1.86% rose 3.4 basis points to 2.209%, according to Tradeweb. On Friday, the 10-year yield marked the longest string of declines since a five-week streak ended Jan. 30. Yields fall as bond prices rise.
The yield on the two-year note TMUBMUSD02Y, -2.17% increased 0.4 basis point to 0.729%. Meanwhile, the yield on the 30-year bond TMUBMUSD30Y, +1.62% gained four basis points to 2.868%.
As Monday’s economic calendar featured no data releases, investors focused on Fed policy makers’ speeches for clues for the date and timing of a potential rate hike. The Federal Reserve next meets in September.
Still to come Monday is a speech from Atlanta Fed President Dennis Lockhart’s speech. Lockhart’s hawkish comments pushed Treasury yields higher in the middle of last week.
Treasury investors will also look at a $64 billion package of three-, 10-, and 30-year Treasury bond auction starting on Tuesday.
“We will watch this week’s price action and auction results as signs of demand going forward, as the 10-year and 30-year [yields] are trading near the lower end of their ranges of 2.15% and 2.80% respectively. We think a break [below] 2.80% in 30s is a strong sign and will pave the way for lower rates,” Chris Bury, head of U.S. rates sales & trading at Jefferies, said in a note.
Meanwhile, U.S. stocks moved higher on Monday after the Dow logged a seven-session losing run on Friday, its worst streak of declines since 2011’s debt-ceiling crisis.
Government bond yields were slightly higher across the eurozone, after downbeat data on China’s economy that came out over the weekend weighed on european stocks, especially the mining sector. The yield benchmark German 10-year bund TMBMKDE-10Y, +2.26% , rose 2.1 basis points to 0.681%.
