Treasuries were poised to snap five days of gains Wednesday as demand for havens waned after the US inked a trade deal with Japan.
The yield on US 10-year debt was two basis points higher at 4.36% Wednesday morning in New York, halting a week-long slide. Germany’s benchmark borrowing costs rose one basis point to 2.60% while UK equivalents were up four basis points at 4.61%.
Hopes that the US will reach other trade deals ahead of its self-imposed Aug 1 deadline are mounting. Secretary of the Treasury Scott Bessent sounded positive on the prospect in an interview on Bloomberg TV, saying talks with the EU are going better and negotiations are back on track with China. Secretary of Commerce Howard Lutnick said that Japan’s pledge of hundreds of billions in US investments “could be” a model for the EU.
Traders will also be mindful of a US$13 billion ($16.6 billion) offering of US 20-year securities later amid the sensitivity of long-maturity debt globally to growing fiscal concerns. A sale of 40-year Japanese bonds earlier saw the lowest bid-to-cover ratio since 2011 and the 10-year yield rose to the highest since 2008.
On Tuesday, Bessent shored up support for US Federal Reserve (US Fed) Chair Jerome Powell, who has come under fire from President Donald Trump for keeping interest rates steady.
See also: EU, US lay out next steps on tariffs to rebalance trade ties
Money markets are betting the US Fed will hold interest rates in a 4.25% to 4.5% range next week, according to swaps tied to policy-meeting dates. However, traders expect at least on quarter-point reduction by October with an 80% chance of a second by year-end.
