NEW YORK: US Treasury yields were little changed to slightly higher on Monday in choppy trading as investors digested potentially destabilizing events such as Brexit turmoil and the US-China trade conflict.
Yields on US 30-year bonds, however, fell, with the 5-year and 30-year yield curve flattening a bit after two days of steepening. The flatter yield curve reflects growing uncertainty about geopolitical risks, analysts said.
"We're seeing yields a bit mixed today, but the overall bias is still to buy Treasuries," said Stan Shipley, fixed income strategist, at Evercore ISI in New York.
He noted that there is a lot of uncertainty in the market on both the geopolitical and US economic fronts.
Brexit concerns, for one, have spread to the US Treasury market, putting a bid on the long end of the curve.
British Prime Minister Theresa May abruptly decided on Monday to pull a parliamentary vote on her Brexit deal, throwing Britain's plan to leave the European Union up in the air on the eve of the vote after repeated warnings from lawmakers she faced a rout.
The arrest of Chinese company Huawei Technologies' chief financial officer Meng Wanzhou in Canada has threatened to derail a US-China trade deal.
China has strongly criticized the detention and demanded her immediate release, threatening "consequences" for Canada if it does not. Her arrest has unsettled global markets as investors worry it could halt attempts to ease trade tensions between the United States and China.
On the economic front, analysts are looking to US inflation data this week that could determine the pace of future rate hikes.
Since late October, 10-year yields have fallen more than 20 basis points amid a mixed set of economic data, the latest being a weaker-than-expected US non-farm payrolls report.
"It's US inflation week and I can't remember a time when inflation numbers are as widely anticipated as jobs numbers," Evercore's Shipley said.
He still expects the Federal Reserve to raise interest rates at next week's monetary policy meeting, but after that, it's anybody's guess.
Shipley added that the market has reduced its rate hike forecasts for next year, with just one or two priced in, from original expectations of three to four.
In mid-morning trading, US 10-year note yields were little changed at 2.859 percent, from 2.85 percent late on Friday.
US 30-year bond yields fell to 3.13 percent, from 3.143 percent on Friday.
On the short end of the curve, US two-year yields were up at 2.721 percent, compared with Friday's 2.711 percent .
Comments
Comments are closed.