By Sunny Oh

Treasury yields rose on Monday to kick off a week during which investors are expected to take their cue from the continued weakness in stocks and geopolitical jitters.

The 10-year Treasury note yield was up 1.5 basis points to 3.156%, while the 2-year note yield rose 1.7 basis points to 2.857%. The 30-year bond yield picked up 1.8 basis points to 3.334%. Bond prices move in the opposite direction of yields.

Much of the momentum in the bond market last week was driven by the ups and downs in equities, as market participants came to grips with the growing implications of rising rates. Though economic data remain mostly robust, analysts are concerned whether stocks will be able to maintain their lofty valuations as the yield on risk-free investments becomes attractive enough to lure investors.

At the same time, the multisession rout in major equity benchmarks last week helped to stir a so-called flight to quality, drawing investors to the perceived safety of U.S. government paper. That has prevented bond yields from climbing much further above their recent seven-year peak.

U.S. stocks opened lower Monday (http://www.marketwatch.com/story/pressure-set-to-resume-for-wall-street-as-stock-futures-pitch-lower-2018-10-15). Dow Jones Industrial Average was down 0.3%, while the S&P 500 was down 0.5%.

"Stock market direction over the next few weeks will determine the trend," wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.

Potentially countering the weakness in stocks, higher rate hike expectations could lift yields. Investors will have a chance to glean further clues on monetary policy from the Federal Reserve's minutes from it is September meeting, released on Wednesday.

The week will also prove busy for analysts eyeing geopolitical flashpoints abroad. The U.K. hopes to resolve key obstacles preventing talks on a future trade deal with the European Union (http://www.marketwatch.com/story/brexit-talks-face-setback-just-days-ahead-of-key-summit-2018-10-14) by the time EU leaders meet at a summit starting from Wednesday.

And Italy's budget fracas will remain in focus after European Central Bank President Mario Draghi urged the Italian government and European Union officials to remain calm, (https://www.cnbc.com/2018/10/13/draghi-to-rome-dont-expect-an-ecb-rescue-if-budget-talks-fail.html) and said he believed that the raging budget debate that threatens to undercut the integrity of the eurozone can be avoided.

On the data front, retail sales for September grew 0.1% (http://www.marketwatch.com/story/late-summer-hangover-us-retail-sales-are-soft-for-the-second-month-in-a-row-2018-10-15), well below the 0.6% increase expected from economists polled by MarketWatch. The drop-off in retail sales could suggest the economy was shedding some of its momentum in the third quarter, contrary to the more buoyant readings from other indicators.

(END) Dow Jones Newswires

October 15, 2018 12:55 ET (16:55 GMT)

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