Benchmark Treasury yields were little changed on Monday, with trading thin ahead of a holiday break and jobs data at the end of the week.
What’s happening
-
The yield on the 2-year Treasury
TMUBMUSD02Y,
4.937%
rose by 4.6 basis points to 4.942%. Yields move in the opposite direction to prices. -
The yield on the 10-year Treasury
TMUBMUSD10Y,
3.843%
was up less than 1 basis point at 3.850%. -
The yield on the 30-year Treasury
TMUBMUSD30Y,
3.853%
fell less than 1 basis point to 3.856%.
What’s driving markets
Activity in fixed income may be thinner than usual on Monday with the Treasury market closing at 2 p.m. Eastern ahead of Tuesday’s full Independence Day break.
U.S. economic updates set for release on Monday include the S&P flash manufacturing PMI for June at 9:45 a.m. and the ISM manufacturing report at 10 a.m. alongside construction spending for May.
And when investors come back from their break they will have the minutes of the Federal Reserve’s June meeting and the nonfarm payrolls report to contend with, on Wednesday and Friday respectively.
The jobs numbers in particular may color traders’ thinking on what the Fed will do next with regard to monetary policy.
Markets are pricing in an 89% probability that the Fed will raise interest rates by 25 basis points to a range of 5.25% to 5.50% after its meeting on July 26, according to the CME FedWatch tool.
The central bank is not expected to take its Fed funds rate target back down to around 5% until June 2024, according to 30-day Fed Funds futures.
What are analysts saying
“U.S. 10-Year yields have pushed higher to right below important technical resistance. $TNX as a gauge for 10-yr yields likely should not exceed 4.00% before rolling back over,” wrote Mark Newton, head of technical strategy at Fundstrat, in a new note.
“A reversal back lower looks quite possible as the month of July gets underway, and pulling back to 3.25% certainly cannot be ruled out. A decline in yields would gel with weekly TNX cycles, and weekly cycle composites show a steady weakening in yields between now and Spring of 2024.”
“The technical formation in TNX charts, however, does have a bullish intermediate-term look. Therefore, while a near-term drop in yields looks possible, the bigger picture might involve yields rolling over temporarily before bottoming and pushing back higher above 4.00%,” Newton concluded.
This story originally appeared on Marketwatch
