BOND REPORT: 10-year Treasury Yield At Below 2% Plumbs Lowest Level Since November 2016
June 25 2019 - 04:03PM
Dow Jones News
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)
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