Yields rise as investors wait on French election
NEW YORK: US Treasury yields rose on Wednesday as traders waited on a new catalyst for direction, after a rally on Tuesday sent yields to five-month lows prompted by concerns about the French election and rising geopolitical tensions.
“We’re consolidating and looking for the next big trade, whether it is a reversal of the rally or an extension of it,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.
Benchmark 10-year notes dropped 8/32 in price to yield 2.21 percent. The 10-year yield fell as low as 2.165 percent on Tuesday and has tumbled from a recent high of 2.63 percent hit on March 14.
“Today is a little bit of a giveback, things are settling down a little bit given the overbought nature of the market,” said Dan Mulholland, head of Treasuries trading at Credit Agricole in New York. “Ten-year notes got down to 2.16 (percent), which is well below where anyone thought we’d get given the backdrop of the economy.”
With no major economic releases due this week investors were focused on the French elections, US tensions with North Korea and any new indications on when the Trump administration is likely to undertake tax and fiscal reforms.
Centrist Emmanuel Macron held on to his lead as favorite to win France’s presidential election, a closely watched poll showed, although it indicated that the first round of voting at the weekend remained too close to call.
US Vice President Mike Pence said that Washington would work with its allies and China to put economic and diplomatic pressure on North Korea but added that the United States would defeat any attack with an “overwhelming response.”
Bonds prices have been boosted in recent weeks by reduced expectations that the Federal Reserve will raise interest rates two more times this year following disappointing economic data releases. The administration of US President Donald Trump is also seen as less likely to pass fiscal or tax reforms in the near term.
Boston Fed President Eric Rosengren said the Fed should begin shedding its bond holdings soon but do so in a very gradual way that has little effect on its planned interest rate hikes.
The US economy expanded at a modest-to-moderate pace between mid-February and the end of March, but inflation pressures remained in check, the Federal Reserve said on Wednesday.—Reuters
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