Treasury yields were little changed Monday morning as traders eyed a busy week that includes U.S. jobs-related data.
What’s happening
-
The yield on the 2-year Treasury
TMUBMUSD02Y,
4.857%
fell 2 basis points to 4.875% from 4.895% on Friday. Yields move in the opposite direction of prices. -
The yield on the 10-year Treasury
TMUBMUSD10Y,
3.935%
slipped less than 1 basis point to 3.961% from 3.968% as of Friday afternoon. -
The yield on the 30-year Treasury
TMUBMUSD30Y,
3.996%
was little changed at 4.022% versus 4.028% late Friday. - On Friday, the 10- and 30-year yields ended the New York session with their biggest weekly increases in three weeks.
What’s driving markets
Outside the U.S., a report released on Monday showed activity in China’s manufacturing sector shrank for a fourth consecutive month in July. The development reinforced the belief that the government will go through with a raft of proposals designed to boost demand.
Traders were also assessing data which showed eurozone core annual inflation remained elevated at 5.5% in July. The yield on German 10-year bunds
TMBMKDE-10Y,
was up 3 basis points to 2.519% after the report on Monday.
In U.S. economic updates set for release on Monday, the Federal Reserve’s senior loan officer survey, or SLOOS, for the second quarter, is due at 2 p.m. Eastern time.
After Friday’s data showed inflationary pressures easing further in the U.S., the main focus this week is likely to be Friday’s nonfarm payrolls report, which should contribute to the Federal Reserve’s assessment of whether to continue tightening monetary policy.
Markets are pricing in a 79.5% probability that the Fed will leave interest rates unchanged at a range of 5.25%-5.5% on Sept. 20, according to the CME FedWatch Tool. The chances of a 25 basis point rate hike to a range of 5.50-5.75% at the subsequent meeting in November are priced at 29.7%.
The central bank is expected to take its fed funds rate target back down to around 5% or lower next year.
What analysts are saying
“Today’s release of the Fed’s second quarter Senior Loan Officers’ Outlook Survey on lending is expected to show further tightening of credit standards,” said Chris Low, chief economist of FHN Financial in New York.
The combination of strengthening GDP growth and tightening credit “underscores the difficulty of managing monetary policy as it becomes restrictive,” Low wrote in a note. “The Fed has engendered tightening credit, but how tight, and whether it will continue to tighten enough to keep inflation on a receding track without tipping the economy into recession is still an open question.”
Read the full article here
