US 10-year Treasury yields seesaw around two-month top amid risk-off mood
|- US bond coupons pause three-day uptrend after crossing August top.
- Market pessimism underpins rush to risk-safety, firmer yields back the DXY.
- Fedspeak, pre-ECB caution and covid/stimulus updates are the key.
US bond traders began the week with extended short selling, keeping the previous bearish bias, on Tuesday to cross the August month’s levels. However, the 10-year Treasury yields drop 0.06 basis points (bps) to 1.365%, taking a breather from the previous rally during early Wednesday.
Market sentiment turned sour the previous day, propelling the rush to risk-safety, as the coronavirus woes escalate and the US stimulus chatter flashes negative signals. Also weighing on the Treasury yields could be the last week’s downbeat US jobs report and ISM Services PMI figures.
The doubling of the virus-led hospitalizations in the US in one year and a 67% hike in the covid-led deaths in the last two weeks, versus the previous period, portrays the COVID-19 fears in America. The same push President Joe Biden towards a six-pronged strategy, the details of which will be out on Thursday and Friday. ''It is an illustration of how the delta variant has hampered progress in curbing the pandemic even as vaccines became widely available,'' The Washington Post wrote.
On the other hand, CNN came out with the news suggesting further hardships for the Democratic party-backed stimulus as it reaches the House. The news said, “House Republicans could face increased pressure to vote against a bipartisan infrastructure package when they return to Washington later this month.”
Amid these plays, the US Dollar Index (DXY) printed the biggest daily jump since August 19, seesaws around 92.55 by the press time. Also portraying the risk-off mood were the Wall Street benchmarks, followed by a mildly offered S&P 500 Futures.
It should be noted that the latest pause in the US Treasury yields rally around the multi-day high underpins firmer Antipodeans and commodity prices. However, a light calendar and the pre-ECB caution may weigh on the market sentiment going forward. Even so, comments from Fed New York President John C. Williams should be watched carefully for fresh impulse.
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