US yields are generally down, in line with gilts, the European bond market

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US Treasury yields slid on Tuesday, following moves in UK and European bonds, as the UK government’s recent moves to stabilize its bond market eased some market anxiety that led to some short hedging.

Benchmark US 10-year yields fell for the first time in four days. They were last down nearly 1.2 basis points (bps), to 4% .

The 10-year gilt yield also fell about four basis points to 3.935% , after rising earlier after the Bank of England said it had not decided to delay the start of its “quantitative tightening” sales of gilts again. The BoE said the Financial Times report that such a move was likely inaccurate.

Yields on German 10-year Bunds also fell on Tuesday, down 3.2 basis points to 2.238% .

“All European markets this morning had higher returns and we saw a reversal this morning,” said Tom di Galoma, managing director of Seaport Global in Greenwich, Connecticut.

“At one point Gilts and Bunds were six to seven bases higher and they’re stable right now. Think that’s what’s really driving Treasuries,” he added.

The yield on 30-year Treasury bonds rose 2.2 basis points to 4.037%.

A closely watched part of the US Treasury yield curve measuring the spread between two- and ten-year Treasury yields considered an indicator of economic expectations, remained inverted at -42.9 basis points.

The yield of the US Treasury two-year bond, which reflects interest rate expectations, fell 3 basis points to 4.427%.

Overall, bond investors remained concerned about the illiquidity of the government fixed income market, prompting the Treasury Department to ask primary traders whether a buyback of the old out-of-run Treasuries would be a solution. appropriate.

“The idea is to buy older securities and issue invoices to pay for the purchases,” said Scott Skyrm, executive vice president of fixed income and repo at Curvature Securities.

“Pretty good in theory, except the dwindling stock of older issues also makes them less liquid.”

US data on Tuesday was mixed and the Treasury market showed little reaction. A report showing U.S. single-family homebuilder confidence fell for the 10th consecutive month in October amid soaring mortgage rates and bottlenecks for building materials.

The National Association of Home Builders/Wells Fargo Housing Market Index fell eight points to 38 this month. Except for the short-lived plunge in spring 2020 when the country went into lockdown during the first wave of Covid-19, this was the lowest reading since August 2012.

On the other hand, US manufacturing output rose 0.4% last month, keeping pace with an upwardly revised 0.4% gain in August. Economists polled by Reuters had forecast factory output to rise 0.2%. Production increased by 4.7% compared to the previous year.

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