Yields rise before $54bn US notes sale, Fed meeting

11 Jun, 2018

The Treasury Department will sell $32 billion in three-year notes and $22 billion in 10-year notes on Monday, to be followed by a $14 billion sale of 30-year bonds on Tuesday.

The sales kick off a busy week of global central bank meetings and other geopolitical events.

"It starts off pretty busy today with quite a lot of supply," said Thomas Simons, a money market economist at Jefferies in New York.

Benchmark 10-year notes fell 9/32 in price to yield 2.966 percent, up from 2.935 percent on Friday.

Futures traders are pricing in a 91 percent likelihood that the US central bank will raise rates on Wednesday for the second time this year.

Fed officials are also due to update their economic and rate projections, and a key focus will be whether the median rate hike expectation increases to four hikes this year, from three.

"It only would take one voter to shift that way," Simons said. A shift higher may be unlikely after Fed officials already bolstered their economic outlook in March. However, "if the median does shift then it does present as a hawkish forecast and you might see the market sell off," Simons added.

A European Central Bank meeting on Thursday is also a key focus after the bank's chief economist said last week that the ECB will debate whether to end bond purchases later this year.

The Bank of Japan will also conclude a two-day meeting on Friday.

Safe haven demand for US bonds also fell on Monday after Italy's economy minister, Giovanni Tria, said on Sunday that Italy's new coalition government has no intention of leaving the euro and plans to focus on cutting debt levels.

Numerous events this week also have the potential to move bonds. US President Donald Trump is due to meet with North Korean leader Kim Jong Un in Singapore on Tuesday to narrow differences on how to end a nuclear stand-off on the Korean peninsula.

British lawmakers will vote on Tuesday and Wednesday on amendments to the EU withdrawal bill, which lays out the legal foundation for the biggest transformation in Britain in decades.

US economic releases this week will include consumer price inflation data on Tuesday.

Copyright Reuters, 2018
 

 

 

 

Read Comments