Treasury Bill Yields Rise With Debt Deal Elusive: Markets Wrap

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(Bloomberg) — Investors are demanding a higher premium for US debt most at risk of default after yet another round of talks on the borrowing limit ended without a deal.

Yields on four-week Treasury bills climbed 7 basis points on Tuesday, bringing their rise since the beginning of May to more than 60 basis points. The two-year Treasury yield climbed 4 basis points, while the 10-year yield was flat. US equity futures were little changed after a lackluster day on Wall Street.

In Europe, French stocks led declines after the economy grew at the slowest pace in four months. Christian Dior SE, Hermes International and other luxury shares dropped.

The debt-ceiling saga has been the center of attention in global markets with time running out for US politicians to reach a deal. President Joe Biden and House Speaker Kevin McCarthy called their discussions on Monday productive, but an agreement that would avert a catastrophic US default remains elusive. That left traders on tenterhooks with only a few days left before June 1, when Treasury Secretary Janet Yellen said her department may run out of cash. Any deal would have to be approved by Congress before then.

“I think a default is very unlikely as I don’t think either Democrats and Republicans want it, but we could get close to it and the deadline,” Fabiana Fedeli, chief investment officer for equities and multi-asset at M&G Plc, said on Bloomberg TV. “The closer we get to the deadline the more nervous clients will get.”

“You could have a move towards safer havens, perhaps the long end of yield curve,” she added.

Read more: US Default Scenarios Span From Localized Pain to Dimon’s ‘Panic’

In other markets, commodities were broadly lower, while the dollar and yen strengthened. Concern is growing about China’s tepid post-pandemic recovery, which is having a negative impact on iron ore and copper prices.

Tokyo’s Topix index fell for the first time in eight days, with semiconductor-related stocks turning lower on news that Japan’s tighter export controls will take effect July 23.

European market sentiment took a hit from weaker manufacturing data. Surveys of purchasing managers across the region unexpectedly dropped to 44.6 in May, further below the 50 level that indicates contraction, according to the report from S&P Global.

Among individual stock movers, Vivendi SE tumbled after billionaire Vincent Bollore sold shares of the media conglomerate, a sign that he’s isn’t planning a buyout. Swiss asset manager Julius Baer Group Ltd. sank after disappointing results.

Key events this week:

  • US new home sales, Tuesday

  • Dallas Fed President Lorie Logan speaks, Tuesday

  • Fed issues minutes of May 2-3 policy meeting, Wednesday

  • Bank of England Governor Andrew Bailey speaks, Wednesday

  • US initial jobless claims, GDP, Thursday

  • Interest rate decisions in Turkey, South Africa, Indonesia, South Korea, Thursday

  • Tokyo CPI, Friday

  • US consumer income, wholesale inventories, durable goods, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 fell 0.3% as of 9:27 a.m. London time

  • S&P 500 futures fell 0.1%

  • Nasdaq 100 futures were little changed

  • Futures on the Dow Jones Industrial Average fell 0.2%

  • The MSCI Asia Pacific Index fell 0.4%

  • The MSCI Emerging Markets Index fell 0.3%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro fell 0.1% to $1.0801

  • The Japanese yen rose 0.2% to 138.26 per dollar

  • The offshore yuan fell 0.2% to 7.0610 per dollar

  • The British pound fell 0.3% to $1.2403

Cryptocurrencies

  • Bitcoin rose 1.4% to $27,278.5

  • Ether rose 1.9% to $1,852.35

Bonds

  • The yield on 10-year Treasuries was little changed at 3.71%

  • Germany’s 10-year yield was little changed at 2.46%

  • Britain’s 10-year yield advanced two basis points to 4.09%

Commodities

  • Brent crude fell 0.2% to $75.82 a barrel

  • Spot gold fell 0.6% to $1,960.24 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott, Ishika Mookerjee and Allegra Catelli.

More stories like this are available on bloomberg.com

©2023 Bloomberg L.P.

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