US Treasury bond yields stabilized on Monday morning as the sovereign debt markets struggled with the outlook for the US economy both inside and outside the US after the end of last week. The reading work in April was far below expectations.
Higher yields in the eurozone as rising expectations from Europe begin to see solid economic improvement are putting US bonds under selling pressure and pushing yields higher.
How do treasuries work?
-
10 year treasury note earns TMUBMUSD10Y,
1,597%
was 1.579%, little changed from its 3 p.m. Eastern Friday at 1.576%. -
The 30 Year Treasury Note TMUBMUSD30Y,
2,317%
The rate was practically unchanged from the end of last week at 2.286%. -
The 2-year treasury bill TMUBMUSD02Y,
0,152%
The return was 0.141% compared to 0.143% on Friday.
Bond yields rise as prices fall, and vice versa.
What motivates treasures?
Yields rose Friday after data showed non-farm wages and salaries rose 266,000 in April, well below consensus projections for a 1 million job gain.
US rates were stable at the beginning of the week, but German bond yields put some upward pressure on policy rates.
10 years of the German Confederation TMBMKDE-10Y,
In about a week it hit a high of around 0.212% after 0.234% on Friday. Strategists attributed part of this yield shift to the improvement in the economic outlook for the eurozone economy and continued concern that the European Central Bank might reduce its commitments. – Purchase of purchases.
At its last meeting at the end of April, the ECB decided to keep its policy unchanged, as expected. However, investors drew on recent comments from Governing Council member Martins Kazaks that the central bank could reduce its purchases of emergency bonds as soon as possible than June if the euro area economy does not deteriorate Bloomberg News reported.
However, the ECB’s chief economist Philip Lane has publicly stated that bond purchases could be increased further if necessary.
The concerns come from US investors worrying about the outlook for US monetary policy. Those concerns were somewhat allayed on Friday following the weaker-than-expected employment report.
Looking ahead, investors will be waiting for a retail sales report slated for Wednesday.
Prior to this report, Chicago Fed Chairman Charles Evans is expected to speak on CNBC at 8:30 a.m. EST and then at a conference for business reporters at 2:00 p.m.
Meanwhile, Robert Kaplan, chairman of the Dallas Fed, is chatting on Bloomberg TV at lunchtime.
What do the strategists say?
“Understandably, equity valuations continue to keep many investors cautious even though the price / earnings ratio continued to decline due to bullish estimates well into the 1920s,” wrote Christopher Smart, chief global strategist and director of Barings. Investment Institute.
“Bond yields could be capped for now as global investors think 1.6% on US Treasuries is good business, while Japanese Treasuries pay nothing and German Bunds are still negative,” he wrote.
“The bigger question, however, remains where the sustainable growth rates will take place,” wrote the strategist.
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