Treasury yields fell on Monday amid uncertainty over the U.S. government debt-ceiling negotiations.
What’s happening
-
The yield on the 2-year Treasury
TMUBMUSD02Y,
4.247%
fell 3.4 basis points to 4.235%. Yields move in the opposite direction to prices. -
The yield on the 10-year Treasury
TMUBMUSD10Y,
3.663%
retreated 2.7 basis points to 3.656%. -
The yield on the 30-year Treasury
TMUBMUSD30Y,
3.922%
fell 1.4 basis points to 3.916%.
What’s driving markets
One-month Treasury bills
TMUBMUSD01M,
which have provided a gauge of the market’s debt ceiling stress, were down 1.6 basis points to 5.391%. That remains near a cycle high and above the 3-month bills
TMUBMUSD03M,
yield of 5.237%
“The primary focus for financial markets continues to be the developments surrounding the U.S. debt ceiling negotiations. As a result, today’s limited data slate is expected to attract minimal interest. However, speeches from…Fed policymakers could provide additional insight into their monetary policy outlooks,” said TickMill Group’s market analyst Patrick Munnelly.
The ‘Fedspeak’ on Monday includes St. Louis Fed President James Bullard making comments at 8:30 a.m. Eastern, San Francisco Fed President Mary Daly talking at 11 a.m., while Atlanta Fed President Raphael Bostic and Richmond Fed President Tom Barkin will be in conversation at the Technology-Enabled Disruption Conference at 11:05 a.m.
Markets are pricing in a 82.6% probability that the Fed will leave interest rates unchanged at a range of 5.0% to 5.25% after its meeting on June 14, according to the CME FedWatch tool.
The central bank is expected to take its Fed funds rate target back down to 4.7% by December, according to 30-day Fed Funds futures.
The minutes of the Fed’s previous rate-setting meeting will be released on Wednesday.
What are analysts saying
“Jerome Powell’s comments [Friday] regarding the need to monitor credit stress within the banking system, along with the ability to secure loans, pushed the Fed Funds Futures market probability for June 14 rate hike down markedly,” said Quincy Krosby, chief global strategist for LPL Financial.
“In addition, with the walkout [Friday] of Republican debt- ceiling negotiators hindering chances for a viable conclusion before the upcoming ‘X’ date, would weaken chances for the Fed to raise rates on June 14,” he added.
