US equity and bond yields have fallen modestly overnight after a disappointing US retail sales release and as the spectre of more trade tariffs hangs over the market.
The US 10 year bond yield fell 3bps to 2.81%, near the low of its recent 2.80% – 2.95% trading range, after a weaker than expected US retail sales release.
The retail sales ‘control group’, which feeds directly into GDP, rose only 0.1% in February, despite near-record levels of consumer confidence.
The Atlanta Fed’s GDPNow index, which provides a real-time estimate of Q1 GDP, fell from 2.5% to 1.9% after the release.
While a number of fundamental factors argue for higher US Treasury yields in the medium term (stronger growth, some evidence of rising US inflation, more treasury supply etc), heavy short positioning among speculative investors appears to be keeping bond yields contained for the moment.
The US yield curve flattened again, with the 2s10s curve falling to 56bps and approaching the lows of the year. An inverted yield curve has historically been a good leading indicator of US recessions, although we are far from that point.
In local rates markets yesterday, the recent flattening trend continued, with the 10 year swap rate down 4bps but the 2 year rate near unchanged.
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1 Comments
As a newbie landing into this area of interest economics and finance thingy, I see speculation everywhere. 10year yeild increase and further fed rate increase was explained and predicted couple of weeks ago, now say speculators containing yeild low..
Just speculative reporting.. nothing can be predicted here :)
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