(Feb 16) : US bond traders will be watching the trajectory of stocks this week and economic releases such as private payrolls data to see whether the rally in Treasuries has legs.
Benchmark 10-year yields enter the holiday-shortened week at the lowest in months, after haven buying spurred by a tech-driven slide in US stocks. A tame inflation reading on Friday helped extend the bond market’s advance, and left traders leaning toward at least two Federal Reserve interest-rate cuts by year-end.
That backdrop is raising the focus on reports such as ADP private payrolls data Tuesday and the minutes from the Fed’s January meeting on Wednesday for a fresh read on the economy and how policy makers are assessing the balance between employment and inflation, after pausing their easing cycle last month.
“The near-term drivers for bonds will be what happens with data and risk assets,” said John Madziyire, a portfolio manager at Vanguard. “The main positive is that bonds have regained their hedging quality and they are doing what they are supposed to do, when risk assets such as equities, bitcoin and commodities are volatile.”
The benchmark 10-year yield ended last week at 4.05%, the lowest since early December. The rate on the two-year Treasury — more sensitive than longer maturities to expectations for Fed policy — fell to 3.42%, the lowest since September.
Meanwhile, traders were fully pricing in two quarter-point cuts ahead this year, and a roughly 50% chance of a third by year-end.
See also: Nasdaq 100 sinks 2% as AI jitters roil Wall Street
What to Watch
- Economic data:
- Feb. 17: ADP weekly employment change; Empire manufacturing; NAHB housing market index
- Feb. 18: MBA mortgage applications; durable goods orders; capital goods orders; housing starts; building permits; New York Fed services business activity; industrial production; manufacturing (SIC) production; capacity utilization; leading index; TIC flows
- Feb. 19: Initial jobless claims; continuing claims; trade balance, exports and imports; wholesale and retail inventories; Philadelphia Fed business outlook; pending home sales
- Feb. 20: Bloomberg Feb. US economic survey; personal income and spending; PCE price index and core index; GDP annualized QoQ; personal consumption; GDP price index; S&P global US manufacturing and services PMIs; new home sales, building permits; U. of Mich. sentiment and inflation expectations
- Feb. 16: Fed Vice Chair for Supervision Michelle Bowman
- Feb. 17: Governor Michael Barr; San Francisco Fed President Mary Daly
- Feb. 18: Bowan; FOMC minutes
- Feb. 19: Minneapolis Fed President Neel Kashkari; Atlanta Fed President Raphael Bostic; Bowman; Chicago Fed President Austan Goolsbee
- Feb. 20: Dallas Fed President Lorie Logan; Bostic
See also: US stocks resume decline as tech weakness drags on indices
- Feb. 17: 13-, 26-, 6-, 52-week bills
- Feb. 18: 17-week bills; 20-year bonds
- Feb. 19: 4-, 8-week bills; 30-year TIPS
uploaded by Isabelle Francis
