By Ellie Ismailidou, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices fell Monday, sending
yields higher and ending the longest winning streak in three
months.
With little in the way of market-moving economic data, and
Federal Reserve policy makers entering a "blackout" period ahead of
the central bank's monetary policy meeting next week, investors
weighed the impact of Chinese stimulus against continued worries
about Greece's finances on the Treasury market.
The People's Bank of China's new program, which will permit
Chinese banks to lend more money, increased investors' appetite for
risky assets like stocks and pushed them out of Treasurys.
Bond yields move inversely to prices, declining as prices
rise.
The announcement had a "psychological influence" in the Treasury
market, considering how great a portion of global growth stems from
China, said Guy LeBas, chief fixed income strategist at Janney
Montgomery Scott, in a note.
But that enthusiasm for riskier assets was tempered by news
about Greece, including reports that the Greek government has
ordered state agencies, pension funds and local government entities
to transfer their cash reserves to the central bank
(http://www.marketwatch.com/story/greece-orders-local-agencies-to-transfer-cash-to-central-bank-reports-2015-04-20).
The Treasury market "has been trading with the [Greek debt
crisis] in the background for over a year...It is a week-to-week
conversation that the markets keep pricing in," said Tom Tucci,
head of Treasury trading at CIBC World Markets Corp.
The next meeting of eurozone finance ministers, known as the
Eurogroup, is Friday, but that is not a "drop-dead deadline" but
rather another step in the negotiations between Greece and its
creditors, Tucci said.
Greece's next repayment dates are May 1, when it must pay 202
million euro ($217.40 million) to the International Monetary Fund,
and May 8, when 1.4 billion euros ($1.51 billion) in Treasury bills
mature. Another 771 million euros ($829.78 billion) is to be repaid
to the IMF on May 12.
Last week, bond investors sought U.S. Treasurys and dumped Greek
bonds on news that Greece missed its budget targets for 2014
(http://www.marketwatch.com/story/greece-misses-budget-targets-for-2014-2015-04-16).
The 10-year benchmark Greek bond yield reached a 29-month high of
13.022% on Friday and continued to climb on Monday, jumping another
57.7 basis points to 13.602%.
Aside from Greece, the last Fed speaker comments
(http://www.marketwatch.com/story/feds-dudley-has-last-word-and-its-meant-to-be-soothing-2015-04-20)before
the blackout -- which means there now will be no more comments
until after next week's meeting -- did not give the market a clear
direction, as New York Fed President William Dudley expressed no
urgency to raise interest rates
(http://www.marketwatch.com/story/feds-dudley-has-last-word-and-its-meant-to-be-soothing-2015-04-20).
There is likely to be less intrigue ahead of the coming Fed
meeting than is typically the case, Ward McCarthy, chief financial
economist at Jefferies, said in a note.
As the Fed has signaled a "data-dependent" approach to
increasing interest rates, the market is still digesting last
week's economic data releases which "were mixed, but could again be
characterized with the now-familiar story of not measuring up to
expectations," McCarthy said.
One of the mysteries of the past half year has been the sluggish
response of consumer spending to lower gasoline prices, Goldman
Sachs economists said in a report dated Friday. Consumers have been
pocketing savings from lower prices at the pump, rather than
spending it.
"We expect that consumers will open their wallet a bit more in
Q2, contributing to a pickup in growth," the report said.
On balance, the yield on the benchmark 10-year Treasury note
rose 4.9 basis points to 1.897% on Monday, according to
Tradeweb.
The yield on the two-year note increase 2.4 basis points to
0.528%. The 30-year bond yield rose 4.8 basis point to 2.553%.
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