U.S. Treasury yields mostly fell on Monday as traders stayed on the sidelines ahead of coming meetings by the Federal Reserve and the European Central Bank.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -1.08% fell 1.3 basis points to 1.829%, while the 2-year note rate TMUBMUSD02Y, -0.98% was up 0.8 basis point to 1.627%. The 30-year bond yield TMUBMUSD30Y, -1.04% slipped 2 basis points to 2.264%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
Traders were reluctant to make sharp moves as policy makers at the Federal Reserve and the European Central Bank hold their last meetings of 2019 this week. But few are expecting major policy moves from either, with the Fed and ECB expected to stand pat on interest rates. Investors instead will watch for insights on the economic and interest-rate outlook from the central banks.
Meanwhile, a first round of three debt auctions this week was unable to shake the bond market from its doldrums. The Treasury Department sold $38 billion of 3-year notes on Monday afternoon to solid appetite but sentiment from that sale didn’t spillover into the longer-dated government bonds.
Yields ended last week higher following a hotter-than-expected reading in the employment report, which showed that U.S. economy gained 266,000 jobs in November and that unemployment fell back to a 50-year low of 3.5%. Strength in the labor market has helped to offset concerns that deteriorating global economic conditions would eventually impact the U.S. economy.
Much of these concerns revolve around shrinking international trade, reflected by China’s report that exports to the U.S. had fallen 23% year-over-year in November. More broadly, exports to all countries fell 1.1% year-over-year.
Market participants are on the lookout for signs of easing trade tensions ahead of the Dec. 15 deadline for additional duties on Chinese imports. If implemented, this month’s tariffs will apply toward more consumer goods and could hamper retail spending going forward, said analysts.
What did market participants’ say?
“Look for the range-bound momentum to persist, likely up to and through the Fed” wrote Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, who suggested traders were unwilling to place one-way direction bets on the market ahead of the central bank’s meeting this week.