NEW YORK: US Treasuries were slightly stronger on Monday, with benchmark 10-year yields falling from two-week highs reached overnight, as concerns about slowing global growth offset better economic momentum in the US
The curve between five-year note and 30-year bond yields flattened to six-year lows as intermediate-dated notes weakened on expectations the Federal Reserve may be closer to increasing interest rates, while investors also sought out the higher yields of long-dated debt.
Yields have increased since data on Friday showed that US employers added the largest number of workers in nearly three years in November and wage gains picked up. The report added to speculation that the Federal Reserve may be closer to raising interest rates from record lows, which most expect will happen next year.
But US bond weakness was capped by concerns over global growth and disinflation. Brent crude fell to a five-year low on Monday.
"The market is struggling with the global growth story and the US story," said Gennadiy Goldberg, and interest rate strategist at TD Securities in New York.
Economic data showed China's exports rose at a slower than expected pace and imports dropped 6.7 percent in November, while Japan's economy shrank more than expected in the third quarter.
Ewald Nowotny, a member of the European Central Bank's Governing Council, said on Monday that the euro zone's economy is weakening "massively" and that he expected inflation to fall early next year. Printing fresh money to buy state bonds could help to stop the slide, he added.
Benchmark 10-year notes were last up 1/32 in price to yield 2.30 percent. The yields fell from a two-year high of 2.35 percent in Asian trading.
The yield spread between five-year notes and 30-year bonds flattened to 126 basis points, falling from 142 basis points seen last Monday.
"We're getting towards a rates hike, that's what is playing out in the belly of the curve," said Goldberg.
Higher yields on three-year notes may help the government sell $25 billion in three-year notes on Tuesday, the first sale of $59 billion in new debt this week.
Three-year note yields have jumped to 1.08 percent, the highest since September 19, from 0.95 percent last Thursday, before the jobs data.
The Treasury will also sell $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday.
Comments
Comments are closed.