The US Treasury yield curve flattened on Monday for a third straight session, as a slew of data that missed expectations rekindled concerns about signs of slowing growth in the world's largest economy. Investors look at the US yield curve for clues about the future economic outlook.
The yield gap between US 5-year notes and 30-year bonds narrowed to 27.20 basis points, the tightest spread in more than six years. The other benchmark measure, the yield spread between US 2-year and 10-year notes, was also flatter at 44.30 basis points, the narrowest in two weeks.
Yields on US 30-year bonds and 10-year notes fell to a more than a one-week low on Monday. The slide in 10-year yields came after hitting more than 3 percent last week, the highest in more than four years. "Fundamentally, we haven't seen the economic data that justify a further run-up in long-term yields," said Mike Lorizo, head of Treasuries trading at Manulife Asset Management in Boston.
Also fuelling the downdraft in yields was month-end buying of Treasuries as investors looked to rebalance between fixed income and equities after a decent selloff in US government bonds, Lorizo added. US Treasuries posted losses of 0.94 percent through April 27, according to the Bloomberg Barclays Treasury Index. Year to date, Treasuries were down 2.1 percent.
The fall in yields started with the release of the personal spending and consumption data. US personal income rose just 0.3 percent in March, compared with expectations of 0.4 percent. This was also revised lower in February to a rise of 0.3 percent, from the previously reported 0.4 percent increase. The US Midwest manufacturing index also came in slightly lower than expected, with a reading of 57.6, while US pending home sales, while posting an increase, fell short of a forecast for a 1.0 percent gain.
Tom Simons, money market economist at Jefferies in New York, said, however, he was not too worried about the slight miss in expectations in Monday's data. "I don't think those would alter the Fed's thinking on rates." In afternoon trading, US 10-year yields slipped to 2.936 percent from 2.957 percent late on Friday, touching a 10-day low of 2.934 percent.
US 30-year yields also dipped to 3.099 percent from Friday's 3.125 percent. Earlier, 30-year yields fell to 3.095 percent, also a 10-day trough. US two-year note yields, meanwhile, were slightly higher at 2.487 percent from 2.484 percent on Friday.
The Federal Open Market Committee, meanwhile, will have a two-day meeting this week, but this is seen to be a non-event as investors do not expect any rate action nor a significant change in the policy statement's tone.
Comments
Comments are closed.