Yields jump on global central bank policy, oil price rise

06 Jul, 2017

Analysts said traders were still grappling with hawkish comments from the heads of the European Central Bank and Bank of England last week, which would be negative for safe-haven government bonds in Europe and the United States.

Those concerns, along with the rising oil prices and traders anticipating that the Fed will begin unwinding its bond holdings later this year, led traders to sell Treasuries even as US June private payrolls data disappointed expectations.

"You're seeing some liquidation as people are trying to wrap their heads around what the central banks have in mind," said Lou Brien, a market strategist at DRW Trading in Chicago.

Longer-dated yields were last rising the most among all Treasury maturities, with 30-year yields up about six basis points from Wednesday's closing level at 2.918 percent. Those yields hit a six-week high of 2.923 percent.

Benchmark 10-year yields were last up the second-most on the day, with those yields touching a nearly eight-week high of 2.391 percent.

While shorter-dated yields were not up as much as long-dated yields, they still hit peaks in early trading with two-year yields hitting a more than eight-year high of 1.435 percent and three-year yields touching a roughly 3-1/2-month high of 1.617 percent.

Minutes from the Fed's June meeting on Wednesday showed that several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August but others wanted to wait until later in the year.

"Most people would say it's pretty clear the Fed is going to start this whole unwinding of the balance sheet," said Stan Shipley, fixed income strategist at Evercore ISI in New York. "That's not good news by itself for long-end Treasuries."

US five-year Treasury yields hit a more than three-month high of 1.968 percent while seven-year yields hit an eight-week high of 2.228 percent.

Analysts said rising oil prices also sent longer-dated yields higher. US crude was last up 2.5 percent at $46.25 per barrel.

The private payrolls data came ahead of the Labor Department's broader US June nonfarm payrolls report on Friday. Economists polled by Reuters expect US employers to have added 179,000 jobs last month, above May's meager 138,000.

 

Copyright Reuters, 2017
 

 

 

 

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