Treasuries Edge Lower; Yen Advances With Yields: Markets Wrap

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(Bloomberg) — Treasuries edged lower on bets the Federal Reserve will keep rates higher for longer. The yen was on the front foot following potentially hawkish remarks by the Bank of Japan governor.

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Treasuries slightly fell across tenors Monday as traders awaited inflation data later this week in an economy that continued to defy gloomy forecasts. Yield on the policy-sensitive two-year paper rose past 5%, while that on the 10-year climbed nearly three basis points to 4.29%.

Treasury Secretary Janet Yellen said she’s increasingly confident that the US will be able to contain inflation without major damage to the job market, hailing data showing a steady slowdown in inflation and a fresh influx of job seekers.

The strong growth outlook in the US and hawkish risks around its Fed-on-hold call led interest-rate strategists at JPMorgan Chase & Co. to raise their year-end forecast for Treasury yields, with the target on the 10-year increased to 4.20% from 3.85%.

Meanwhile, the yen strengthened 0.8% against the greenback after BOJ Governor Kazuo Ueda told the Yomiuri newspaper there may be sufficient information by year-end to judge if wages will continue to rise, which is a key factor in deciding whether or not to end its super-easy policy. The yield on the government’s 10-year bond jumped 5 basis points to 0.7%, the highest since 2014, and raised the possibility of the BOJ buying more bonds to keep yields under control.

Ueda’s hawkish comments may be intended to keep yen depreciation in check, Naomi Muguruma, chief fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, wrote in a note.

Also in currencies, China’s offshore yuan came off a near-record low versus the dollar and strengthened as much as 0.4% in trading following the central bank’s stronger-than-expected yuan fix. The fixing was the strongest on record in data going back to 2018.

Asian equities traded mixed amid a lack of positive drivers. Shares in Hong Kong fell as trading resumed after a closure on Friday due to a heavy rainstorm. Equities in mainland China climbed to snap a four-day loss, with easing deflationary pressure and a report on more cities relaxing mortgage rules helping stabilize sentiment.

US stock futures were flat following small moves in shares at the end of the week, with the S&P 500 edging higher after a three-day drop.

Offering Spree

Borrowers in Asia extended a recent global corporate bond offering spree at the start of the week. At least three firms were marketing dollar notes Monday, while two others had hired banks for potential deals.

The dollar fell against all of its Group-of-10 counterparts after its recent rally drove the currency to a record streak of weekly gains. The greenback has been bolstered recently by bets the Fed will keep interest rates higher for longer.

Elsewhere, oil declined after a two-week rally and gold ticked higher.

Key events this week

  • UK jobless claims, unemployment, Tuesday

  • Eurozone industrial production, Wednesday

  • UK industrial production, Wednesday

  • US CPI, Wednesday

  • Eurozone ECB rate decision, Thursday

  • Japan industrial production, Thursday

  • US retail sales, PPI, business inventories, initial jobless claims, Thursday

  • China property prices, retail sales, industrial production, Friday

  • US industrial production, University of Michigan consumer sentiment, Empire Manufacturing index, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 11:50 a.m. Tokyo time. The S&P 500 rose 0.2% on Friday

  • Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 0.1%

  • Japan’s Topix rose 0.1%

  • Australia’s S&P/ASX 200 was little changed

  • Hong Kong’s Hang Seng fell 1.5%

  • The Shanghai Composite rose 0.5%

  • Euro Stoxx 50 futures were little changed

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3%

  • The euro rose 0.2% to $1.0724

  • The Japanese yen rose 0.8% to 146.67 per dollar

  • The offshore yuan rose 0.4% to 7.3380 per dollar

  • The Australian dollar rose 0.6% to $0.6413

Cryptocurrencies

  • Bitcoin fell 0.4% to $25,721.61

  • Ether fell 0.5% to $1,610.75

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 4.29%

  • Japan’s 10-year yield advanced five basis points to 0.700%

  • Australia’s 10-year yield advanced eight basis points to 4.17%

Commodities

  • West Texas Intermediate crude fell 0.6% to $87.02 a barrel

  • Spot gold rose 0.2% to $1,922.91 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Brett Miller and Masaki Kondo.

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