The yield on bond prices rose on Tuesday due to optimistic comments on China’s economic progress, leading to a decrease in demand for Treasuries.
- The yield on the 2-year Treasury TMUBMUSD02Y, 4.699% increased 3.6 basis points to 4.704%.
- The yield on the 10-year Treasury TMUBMUSD10Y, 3.739% added 2.1 basis points to 3.746%.
- The yield on the 30-year Treasury TMUBMUSD30Y, 3.828% gained 1.7 basis points to 3.834%.
The recent shift towards a more risk-positive attitude across global markets due to China’s optimistic comments on its economic growth were decreasing the demand for sovereign bonds whilst nudging Treasury yields higher.
U.S. economic updates set for release on Tuesday include durable goods orders for May (8:30 a.m. Eastern), the S&P Case-Shiller home price index for April (9 a.m.), and May new home sales (10 a.m.), alongside the June consumer confidence reading.
A significant point of interest this week will be Friday’s PCE inflation indicator, which is a critical gauge of price momentum closely monitored by the Federal Reserve.
Markets Pricing In Higher Interest Rates After Fed Meeting
Markets are indicating a 77% chance that the Federal Reserve will raise interest rates by 25 basis points to a range of 5.25% to 5.50% during its upcoming meeting on July 26, according to the CME FedWatch tool. Meanwhile, 30-day Fed Funds futures reveal that the central bank isn’t projected to return its Fed funds rate target to roughly 5% until April 2024.
Analysts Discuss Rise in Sovereign Bond Prices
After a survey of German business confidence indicated growing weakness in Europe’s largest economy, sovereign bond prices increased in the US and Germany on Monday, according to Saxo Bank. In spite of the rally, the US Treasury sold two-year notes at the highest yield since February, which is the second highest since 2007. Saxo strategists predict that sovereign yields in the US and Germany will rise this week at the Sintra forum, where central bankers are expected to reinforce their commitment to combating inflation.
Additionally, Saxo expects the front part of the yield curves to resume its rise toward 5% in the US and 4% in Germany, while long-term yields remain underpinned by weak growth data.