US Treasury yields were flat on Monday as growing hopes of stimulus in China and the potential for intervention in Japan helped support bids for riskier assets like oil and stocks. With no major US data due and thin liquidity, Treasuries sold off early, following a theme of improved risk appetite from Friday. But as stocks pared gains, most maturities moved to neutral territory as investors looked towards reports later in the week to shed more light on the US inflation picture.
"Bonds sold off sharply this morning on fears of inflation, but then just settled in to wait-and-see mode" said Bryce Doty, senior portfolio manager at Sit Investment Associates in Minneapolis. On Wednesday, investors will get readings on March's US retail sales and producer price index, and on Thursday the government will release consumer price index figures. All three metrics will be closely watched by investors as they could signal that inflation is rising faster than anticipated.
"If those were to surprise to the upside that would cause an intense focus on inflation and a resulting spike in yields," Doty said, adding that even if the numbers matched economists expectations, markets "could still see a fair amount of volatility." Longer-dated yields rose modestly while shorter-dated maturities were generally unchanged, with the 30-year bond surrendering 3/32 in price to yield 2.565 percent. The 2-year note was unmoved with a yield of 0.7027 percent. Benchmark 10-year Treasury yields fell 1/32 in price to yield 1.727 percent.
Oil rose around 2 percent as investors hoped that a meeting of producers in Doha, Qatar, next week could achieve a price freeze for crude at current output levels. Wall Street was mixed, as stocks retreated from earlier gains, with the S&P 500 down 0.15 percent.