Sep 11, 2019

Bonds | U.S. Treasury Yields Report: US debt yields add to September rebound amid hotter business price data

Thomas Franck

U.S. government debt yields rose Wednesday as the Treasury Department continued to add to the American debt supply and a brighter trade outlook between Washington and Beijing stemmed August’s flight to safety.
The yield on the benchmark 10-year Treasury note rose to 1.735%, while the yield on the 30-year Treasury bond was also higher at around 2.213%. The yield on the 2-year note rose to 1.668%.
The 10-year yield, used as a barometer for auto loans and mortgages, has climbed more than one-quarter of a percentage point since reaching a three-year low of 1.429% last Wednesday. Still, the rate remains well below the levels north of 2%, where it traded at the end of July before falling more than 50 basis points in August. Yields rise as prices fall.
Fixed income investors looked ahead to a number of potential catalysts in the coming sessions, including the European Central Bank (ECB)’s Thursday meeting. Policymakers are seen as likely to announce a package that could include a rate cut.
The U.S. Federal Reserve will meet next week, on September 18, with the Bank of Japan scheduled to conclude its policy meeting the following day. The Fed is widely expected to cut the overnight lending rate 25 basis points amid lukewarm inflation readings and the threat of global economic slowdown.
The U.S. central bank in July cut the benchmark federal funds rate for the first time since 2008 as an insurance cut not against what’s wrong with the economy right now, but where GDP could fall in the future.
In approving the cut, the FOMC cited “implications of global developments for the economic outlook as well as muted inflation pressures.” The committee called the current state of growth “moderate” and the labor market “strong,” but decided to loosen policy anyway.
The Labor Department said Wednesday that business prices rose more than expected in August, suggesting to some that inflation may be starting to build. The producer price index, a gauge of how much businesses pay for goods and services, rose 0.1% in August from the previous month, topping economist expectations for flat growth.
Excluding volatile food and energy components, producer prices rose 0.3%, above the 0.2% increase expected.
The Treasury Department auctioned $24 billion in 10-year notes at a high yield of 1.739%. The bid-to-cover ratio, an indicator of demand, was 2.46. Indirect bidders, which include major central banks, were awarded 62.6%. Direct bidders, which includes domestic money managers, bought 12.7%.

U.S. Markets Overview: Treasurys chart

US 3-MOU.S. 3 Month Treasury1.9620.000.00
US 1-YRU.S. 1 Year Treasury1.79-0.0160.00
US 2-YRU.S. 2 Year Treasury1.680.0160.00
US 5-YRU.S. 5 Year Treasury1.5980.0330.00
US 10-YRU.S. 10 Year Treasury1.7440.0420.00
US 30-YRU.S. 30 Year Treasury2.2230.0420.00

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