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BOND REPORT: 10-year Treasury Yield At Below 2% Plumbs Lowest Level Since November 2016

Date : 25/06/2019 @ 21:03
Source : Dow Jones News

BOND REPORT: 10-year Treasury Yield At Below 2% Plumbs Lowest Level Since November 2016

By Sunny Oh

10-year German government bond yield hits record low of negative 0.33%

Treasury yields traded lower on Tuesday as investors sifted for clues on the outlook for rate cuts among speeches by Federal Reserve officials, while monitoring headlines around an upcoming meeting of U.S. President Donald Trump and Chinese leader Xi Jinping.

What are Treasurys doing?

The 10-year Treasury note yield slipped 2.8 basis points to 1.994%, its lowest since Nov. 8, 2016. The 2-year note yield , sensitive to expectations for interest-rate changes, ended up virtually unchanged at 1.736%, from an intraday low of 1.703%. The 30-year bond yield fell 2.5 basis points to 2.527%, its lowest since Oct. 25, 2016.

What's driving Treasurys?

Speeches from senior Federal Reserve officials helped to drive volatility in Tuesday's session. St. Louis Fed President James Bullard said he thought a 50-basis-point rate cut in July was excessive (http://www.marketwatch.com/story/feds-bullard-says-he-is-not-in-favor-of-half-point-rate-cut-in-july-2019-06-25), even though he was the sole member of the central bank's rate-setting committee to vote for lower rates.

Fed Chairman Jerome Powell fielded questions (http://www.marketwatch.com/story/powell-says-the-fed-is-grappling-with-whether-to-cut-interest-rates-2019-06-25)at a moderated discussion held by the Council of Foreign Relations. The head of the U.S. central bank said a rate cut in July was not a done deal, though he conceded a growing contingent at the Fed were in favor of easing policy. Powell's and Bullard's remarks helped lift yields for short-term government paper from intrasession lows .

Traders of fed fund futures have priced in a 100% chance of at least a 25-basis-point rate cut in July, according to the CME Group.

The budding optimism going into the G-20 summit waned after Reuters reported that a senior U.S. official said that President Donald Trump would be "comfortable with any outcome (https://www.reuters.com/article/us-g20-summit-trump-bilaterals/trump-comfortable-with-any-outcome-from-pivotal-xi-talks-official-idUSKCN1TP2YP)" from his scheduled talks with Chinese leader Xi Jinping. Still, both U.S. and Chinese trade officials agreed to resume trade negotiations ahead of the meeting (https://www.scmp.com/news/china/diplomacy/article/3015923/china-us-agree-resume-trade-talks-phone-call-ahead-xi-trump).

After a fresh round of U.S. sanctions on Iran's leaders, its government responded that the move had led to the "permanent closure of the diplomatic path with the government of the United States."

What else is on market participants' radar?

"Markets are over reacting to Bullard and Powell when they should remain focused on worrisome geopolitical trends. All Fed speakers are behind the curve this week, partly because no one can adjust their views as fast as world leaders," wrote Jim Vogel, an interest-rate strategist at FTN Financial.

What else is on investors' radar?

In economic data, the Conference Board's consumer confidence reading for June fell sharply to 121.5, a two-year low. New home sales numbers for May ran at an annual pace of 626,000, slowing from its annualized reading of 679,000 in May.

The Treasury Department sold $40 billion of 2-year notes to strong demand. Debt sales for government paper can influence trading for the outstanding market.

 

(END) Dow Jones Newswires

June 25, 2019 15:48 ET (19:48 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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