BOND REPORT: Treasury Yields Turn Lower After IMF Cuts Global-growth Outlook
07 October 2015 - 3:28AM
Dow Jones News
By Ellie Ismailidou, MarketWatch
Investors brace for earnings, new bond sales
Treasury yields turned lower on Tuesday after the International
Monetary Fund trimmed its global-growth forecast citing the effect
of declining commodity prices and increasing financial market
volatility on emerging markets.
Earlier in the day, yields had risen for a second trading
session, as investors braced for the beginning of quarterly
earnings along with a flurry of new Treasury and corporate bond
sales.
But yields turned lower while the stock market's rally fizzled,
(http://www.marketwatch.com/story/us-stock-futures-slip-after-rally-as-earnings-season-looms-2015-10-06)
as the IMF's report came on the heels of a Commerce Department
report early Tuesday morning, which said U.S. exports dropped to
their lowest level in three years
(http://www.marketwatch.com/story/us-trade-deficit-leaps-16-in-august-to-483-billion-2015-10-06)
leading the trade deficit to jump more than what economists had
anticipated.
On balance, the yield on the benchmark 10-year Treasury note
traded 1.4 basis points down on the day to 2.069% Tuesday
afternoon, according to Tradeweb. One basis point is equal to one
hundredth of a percentage point.
Treasury yields fall when prices rise and vice versa.
Meanwhile, the 30-year bond yield fell by 1.1 basis point to
2.887% while the yield on the two-year Treasury note shaved off 0.8
basis point to 0.701%.
A flurry of new Treasury and corporate-bond offerings is on
investors' minds. The spate of issuance comes after $21 billion in
three-month Treasurys were sold Monday at a yield of zero, the
lowest yield at a three-month auction ever recorded.
(http://www.marketwatch.com/story/3-month-treasury-bills-sold-at-record-low-0-yield-2015-10-05)
The Treasury department will sell $24 billion three-year notes
on Tuesday, $21 billion in 10-year notes on Wednesday, and $13
billion 30-year bonds on Thursday.
When large volumes of new bonds are sold to the market, prices
of existing bonds tend to fall and yields tend to rise.
The impending new bond sales are "the excuse for some of the
pressure on 10-year and 30-year [Treasurys]," said David Ader, head
of government bond strategy at CRT Capital Group, in a Tuesday
note.
Abroad, European government bonds were under selling pressure
Tuesday after German manufacturing orders unexpectedly slumped in
August
(http://www.marketwatch.com/story/german-manufacturing-orders-slump-unexpectedly-2015-10-06).
Investors braced for a speech by European Central Bank President
Mario Draghi scheduled for Tuesday evening local time.
"Speculation is rising that the ECB will be forced by lowflation
to expand their [quantitative easing] program, and although it's
unlikely Draghi will address that prospect directly, any hints in
his remarks will have more bearing for the stimulus outlook today
than they did several months ago," said Guy LeBas, chief
fixed-income strategist at Janney, in a Tuesday note.
The yield on the benchmark 10-year German bond known as the
bund, gained 3.1 basis points to 0.598%, after falling Friday to
its lowest level since early June.
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(END) Dow Jones Newswires
October 06, 2015 12:13 ET (16:13 GMT)
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