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US Treasury yields hover around multi-day top after biggest jump in three months

  • US 10-year Treasury yields seesaw near six-week high, 2-year coupon clings to March 2020 high.
  • Omicron fears, Fed rate-hike concerns propel yields ahead of the key US data flow.
  • US ISM Manufacturing PMI to decorate daily calendar, FOMC Minutes, jobs report are crucial for the week.

US Treasury bond coupons stabilize around multi-day top during early Tuesday, after the previous day’s stellar run-up. The reason could be linked to an absence of major data/events, as well as cautious sentiment ahead of the US ISM Manufacturing PMI. However, fears relating to the South African covid variant and Fed’s rate-hike keep bond bears hopeful.

That said, the US 10-year Treasury yields take rounds to 1.625-630% of late, after rising to 1.64% the previous day. Further, the two-year bond yields ease to 0.776% versus the latest peak of 0.802%, also the highest level since March 2020. It’s worth noting that the US Treasury yields jumped to the six-week top for 30-year, 20-year, 10-year and 5-year notes on Monday.

Although the bond yields remain firmer, US equities remained firmer amid hopes of stimulus. Even so, S&P 500 Futures and Asia-Pacific shares trade mixed by the press time.

Growing fears of the coronavirus, backed by record-high infections, joined escalating US inflation expectations to underpin the previous run-up of the US Treasury yields. The latest pullback, however, may have a little fundamental backup. Even so, firmer China Caixin Manufacturing PMI and hopes of further stimulus from the US, Beijing and Europe could be spotted as responsible for the latest corrective move.

Reuters tally suggested the doubling of the covid cases at the latest, which in turn poured cold water on the face of the previous studies that suggested Omicron as less severe than the earlier variants of the COVID-19. The jump in infections strain national medical systems in the key economies and hint at another round of pandemic that could weigh on economics.

Additionally, the US inflation expectations, as per the 10-Year Breakeven Inflation Rate numbers from the Federal Reserve Bank of St. Louis (FRED), jumped to a fresh high in six weeks to portray further prices pressure ahead, allowing Fed hawks to keep controls.

Looking forward, the US ISM Manufacturing PMI for December, expected 60.2 versus 61.1, will offer immediate direction to the markets. However, major attention will be given to the Fed rate-hike concerns and virus updates for clear direction.

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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