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U.S. Treasury yields were slipping on Tuesday at the start of a holiday-abbreviated week for U.S. financial markets, after observance of the Independence Day holiday on Monday given the holiday fell on a Sunday this year.
How Treasurys are performing?
-
The 10-year Treasury note
TMUBMUSD10Y,
1.378%
was at 1.425%, compared with 1.434% at 2 p.m. Eastern Time on Friday, with bond markets closing an hour earlier ahead of the long holiday weekend. Yields for debt fall as prices rise. -
The 30-year Treasury bond
TMUBMUSD30Y,
1.988%
was yielding 2.042%, versus 2.050% on Friday. -
The 2-year Treasury note
TMUBMUSD02Y,
0.239%
rate was as 0.236%.
Fixed-income drivers
Yields for U.S. government debt drifted lower, following the path of European bonds. Some analysts are betting that the European Central Bank may remain accommodative despite other policy makers in the world pointing to plans to pull back on easy-money measures.
On Friday, Treasury yields fell even though the U.S. Labor Department said 850,000 jobs were created in June, more than the 706,000 job that were estimated by economists polled by Dow Jones and MarketWatch. The unemployment rate, however, rose to 5.9%, compared with 5.8% last month and an expectation for 5.6%.
On Friday, the 2-year Treasury put in its largest weekly decline, down 3.2 basis points, since July 31, 2020, while the 10-year note saw its sharpest weekly decline, off 10.1 basis points, since June 12, 2020, according to Dow Jones Market Data.
Looking ahead, economic readings for the services sector were due Tuesday, with IHS Markit’s purchasing managers index due at 9:45 a.m. Eastern Time, followed by the more closely tracked survey conducted by the Institute for Supply Management due at 10 a.m.
The moves for Treasury yields over the week come even as evidence of surging inflation has mounted in the economic rebound from the COVID-19 pandemic, implying that fixed-income investors view price pressures as a fleeting phenomenon.
However, inflation concerns were back in focus Tuesday, at least in the short-term, as oil prices surged
CL.1,
toward the highest levels since 2014, following the breakdown of talks between OPEC and its allies over the weekend that were aimed at further lifting output curbs beginning in August.
What strategists and traders are saying
“A primary reason Treasury yields are pressuring June lows again is the difficulty in following ‘simple’ economic signals in the transition to the post-pandemic economy in the US.,” wrote Jim Vogel, executive v.p. president at FHN Financial, in a note.
“With so many strongly held views on inflation and recovery, stakes are higher for every possible takeaway from the major releases (NFP, CPI, retail sales). Two issues from Friday’s number troubled two bond-bearish views. For those who see long-lasting price pressures across the economy because workers ‘now have the upper hand in getting a larger share of the pie,’ total jobs of 850k were too high,” he wrote.
