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U.S. yields rise for 3rd day, tracking Europe, as ECB meeting looms

Credit: REUTERS/THOMAS WHITE

U.S. Treasury yields rose on Wednesday for a third straight day, moving in lock step with the euro zone bond market, amid uncertainty about Thursday's European Central Bank meeting, which could prove less-aggressive in easing monetary policy.

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 11 (Reuters) - U.S. Treasury yields rose on Wednesday for a third straight day, moving in lock step with the euro zone bond market, amid uncertainty about Thursday's European Central Bank meeting, which could prove less-aggressive in easing monetary policy.

U.S. benchmark 10-year and 2-year notes climbed to five-week peaks, while those on 30-year bonds advanced to four-week highs. In the euro zone, most 10-year bond yields gained, holding close to recent highs.

Analysts said a report late on Tuesday that the ECB may delay quantitative easing and tie it to upcoming economic data may have triggered the latest sell-off in European debt.

"There was an expectation that the ECB would be aggressive with easing," said Tom Simons, economist at Jefferies in New York. "If they're not, that kind of changes the calculus a little bit. There's nervousness on that front, so there's a lot of paring back of positions."

A Reuters poll showed nearly 70 economists were expecting the ECB to cut its deposit rate at the meeting, predicting a 10 basis point reduction to -0.5%. But a majority of economists also believed the ECB could introduce some form of compensation for banks to offset the adverse impact of negative rates.

U.S. yields also found support from a further easing in U.S.-China trade tensions after President Donald Trump fired his national security adviser, John Bolton, perceived as a China policy hawk, amid disagreements on foreign policy.

Concerns about the trade dispute further waned after China on Tuesday announced its first batch of tariff exemptions for 16 types of U.S. products, days ahead of a planned meeting between trade negotiators.

In mid-morning trading, U.S. 10-year note yields US10YT=RR rose to 1.731% from 1.702% late on Tuesday. Early in the session, 10-year yields hit a five-week high of 1.752%.

Yields on 30-year bonds also advanced, to 2.213% US30YT=RR from 2.181% on Tuesday, moving further away from record lows of 1.905% touched in late August. U.S. 30-year yields also hit a four-week peak of 2.233% earlier in the global session.

At the short end of the curve, U.S. two-year yields rose to 1.668% from Tuesday's 1.664% US2YT=RR, hitting a five-week high of 1.686%.

U.S. yields extended their rise after data showed core U.S. producer prices rebounded in August after falling the previous month, suggesting some pick-up in inflation.

Later on Wednesday, the Treasury will auction $24 billion of re-opened U.S. 10-year notes.

September 11 Wednesday 10:16AM New York / 1416 GMT

Price

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

1.92

1.9615

0.000

Six-month bills US6MT=RR

1.84

1.8882

-0.005

Two-year note US2YT=RR

99-175/256

1.6641

0.000

Three-year note US3YT=RR

99-178/256

1.6045

0.013

Five-year note US5YT=RR

98-106/256

1.5832

0.018

Seven-year note US7YT=RR

98-20/256

1.6683

0.025

10-year note US10YT=RR

99-12/256

1.7299

0.028

30-year bond US30YT=RR

100-212/256

2.212

0.031

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

-1.25

0.75

U.S. 3-year dollar swap spread

-4.25

1.50

U.S. 5-year dollar swap spread

-6.50

0.25

U.S. 10-year dollar swap spread

-12.00

-0.25

U.S. 30-year dollar swap spread

-42.25

-0.25

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve Orlofsky and Dan Grebler)

((gertrude.chavez@thomsonreuters.com; 646-223-6322; Reuters Messaging: gertrude.chavez.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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