[ad_1]
(Bloomberg) – Treasuries continued their plunge in September, bringing the 10-year benchmark to its highest level since early August, as US economic data was stronger than expected.
Bonds dropped after August retail sales and the Consumer Confidence Index of the University of Michigan in September rose more than expected, which boosted confidence in the market. Economic expansion. Yields increased across the curve, with the 10-year increase reaching 1.90%, up more than 12 basis points from the record high of 1.43% recorded early in the year. month. The gap between 2-year and 10-year returns, considered an indicator of recession when it's the opposite, as in August for the first time since 2007, has been reduced to over 9 base points.
The decline in Treasury securities comes as some central bank officials reassess the effectiveness of the easing of efforts for the meeting of the US Federal Reserve on September 18. The odds of a quarter-point rate reduction, for which futures contracts had been fully taken into account for weeks, declined to reflect a low probability of not changing. Leaders of the European Central Bank (ECB) questioned the quantitative easing plan unveiled Thursday, helping to fuel the move. Yields climbed in the developed markets: in Japan, the 10-year rate recorded its largest intra-day increase since more than a year.
"Central banks are studying their effects by continuing to lower rates," said Jason Ware, Head of Institutional Transactions for 280Securities in San Francisco. "The market may have gone down and resulted in too low returns with a bleak view of what is happening in the economy."
Traders have also reduced their expectations for additional Fed rate cuts this year, and now see less than half a point of additional relaxation. At one point last month, the market had announced additional cuts of nearly 70 basis points in 2019, due to the increase in trade frictions.
The increase in 10-year US yields led to a rise in the volume of futures, as the rate exceeded its 50-day average.
As Treasury yields increased, US dollar swap spreads – the spread between the fixed component of a swap and the corresponding Treasury yield – also increased. This is usually a sign that payment flows are exacerbating movements that favor higher yields, while large investors are looking to reduce the duration of the portfolio.
The lack of interest from homeowners in refinancing their mortgages in a context of rising yields could be one of the factors that would push investors to reduce their duration by selling Treasury bonds or by swaps.
In August, treasury bills recorded their largest monthly gain since the bottom of the 2008 financial crisis and their yields fell as a result of lower yields in Europe and worries over the trade war between the states. United States and China. The magnitude of the recovery has made the market vulnerable to a selloff, interest rate strategists at Morgan Stanley said last week.
(Adds swaps to sixth, seventh paragraphs and strategists in eighth paragraph.)
– With the help of Edward Bolingbroke.
To contact the reporter about this story: Vivien Lou Chen in San Francisco at [email protected]
To contact the makers of this story: Benjamin Purvis at [email protected], Mark Tannenbaum, Elizabeth Stanton
<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "For more articles like this, visit us visit to bloomberg.com"data-reactid =" 35 "> For more articles like this, go to bloomberg.com
© 2019 Bloomberg L.P.
[ad_2]
Source link