Treasury Yields Fluctuate Near Four-Month High Versus G-7 Peers

What to Expect From U.S. Treasury Market Auctions
  • U.S. plans to auction three-, 10-, 30-year debt this week
  • Daiwa SB says Yellen speech, Italy are reasons to hold bonds

Treasury benchmark 10-year note yields held close to a four-month high versus their Group of Seven peers after U.S. employers last week added more jobs than economists forecast.

The spread widened to 111 basis points, the most since late March. Treasuries fluctuated Monday after 10-year yields on Aug. 5 climbed by the most since March when data showed the world’s biggest economy added more workers than expected in July. Mohamed El-Erian said traders are underestimating the odds the Federal Reserve will raise interest rates next month. 

Yields are rising as governments in the U.S., Japan and Australia prepare to auction bonds this week. The U.S. is selling three-, 10- and 30-year debt over three days starting Tuesday. Japan plans to auction 30-year securities Tuesday. Australia will offer 2027 debt Wednesday and 2023 securities Aug. 12.

“The economic situation is not so gloomy,” said Park Sungjin, the head of principal investment in Seoul at Mirae Asset Securities Co., which oversees $8 billion. “We have seen the bottom in Treasury yield levels.”

The U.S. 10-year note yield was little changed at 1.58 percent as of 11:17 a.m. in New York, Bloomberg Bond Trader data show. The price of the 1.625 percent security due in May 2026 was 100 11/32. The figure has risen from a record low of 1.318 percent set in July. It will be higher than 1.90 percent by year-end, Mirae’s Park said.  

U.S. Jobs

Daiwa SB Investments sees plenty of reasons to sticks with bonds, according to Kei Katayama, one of the investors for the $52.9 billion under management at the company in Tokyo. A speech by Fed Chair Janet Yellen Aug. 26, an Italian referendum on constitutional reform, the U.S. presidential election and expectations for the start of U.K. negotiations on leaving the European Union will all provide reason to seek safety in debt, he said.

“Payrolls were very strong, but not strong enough to offset all the uncertainties that are coming toward the year-end,” Katayama said. “It will be very hard for yields to go up globally.”

For more on the outlook for the Federal Reserve, click here.

Traders see about a 26 percent chance the Fed will increase its benchmark at its next meeting in September, futures contracts indicate. El-Erian, the chief economic adviser at Allianz SE and a Bloomberg View columnist, said he thinks the chance is as high as 45 percent, speaking on Bloomberg Television following the employment report last week.

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