US Treasury prices fell on Monday, with benchmark yields rising from near two-week lows as hopes for more central bank stimulus overseas stoked demand for stocks and other risky assets, reducing demand for low-yielding government debt. Hedging linked to this week's corporate bond supply also spurred selling in Treasuries, analysts said.
Oil prices, which hit five-week highs on hopes producers would act to stabilise the market, together with bets the Bank of Japan may provide more measures to help its economy in the wake of disappointing domestic growth and inflation data, propelled Wall Street's three major indexes to all-time highs.
"I am looking at the Treasuries market to be bouncing around here and trade off equities," said Brian Rehling, global co-head of fixed income strategy at Wells Fargo Investment Institute in St. Louis, Missouri. On light trading volume, benchmark 10-year Treasury notes were down 11/32 in price with a yield of 1.552 percent, up 4 basis points from late on Friday. The 10-year yield touched a near two-week low on Friday following surprisingly weak data on July US retail sales. The sales figures undercut optimism about economic growth in the third quarter stemming from an upbeat July jobs report a week earlier.
"That put another data point for the Fed to stay on hold," Rehling said. "We are going to continue to get these mixed signals." The New York Federal Reserve said on Monday its "Empire" regional business gauge unexpectedly fell into contraction territory in August, while the National Association of Home Builders Association said its measure of members' view on the housing market edged up, as expected, in August. But it revised down its July reading.
These figures supported the view that third-quarter US gross domestic product may not be as strong as previously thought and the Fed would leave rates alone at its September policy meeting. Interest rates futures implied traders saw a 12 percent chance of a Fed rate hike next month, up from Friday's 9 percent probability, according to CME Group's FedWatch program.
Investors await a speech from Fed Chair Janet Yellen on August 26 at the central bank's annual conference in Jackson Hole, Wyoming for possible clues on the timing on a rate hike. On the supply front, companies sold $1.825 billion in investment-grade bonds on Monday, out of the $10 billion to $15 billion expected for sale this week, according to IFR, a unit of Thomson Reuters.