Yellen’s Hawkish Turn Sees Treasury Futures Drop on Memorial Day

Updated on
  • Remark that growth would warrant rate increase spurs slide
  • Treasury bills, notes, bonds are closed worldwide Monday

Treasury 10-year futures contracts fell by the most in more than one week after Federal Reserve Chair Janet Yellen said Friday improvement in the U.S. economy would warrant raising interest rates in the coming months.

Ten-year Treasury futures contracts for September delivery slid 14/32, or $4.38 per $1,000 face amount, to 129 9/32 as of 11:07 a.m. in New York, based on electronic trading at the Chicago Board of Trade. It was the biggest decline since May 18.

Bond traders are still reacting to Yellen’s comments because trading of bills, notes and bonds closed early in New York Friday ahead of the U.S. Memorial Day holiday, said John Gorman, the head of U.S. debt trading for Asia and the Pacific at Nomura Holdings Inc. in Tokyo. The firm is one of the 23 primary dealers that trade directly with the U.S. central bank.

The odds of a rate increase in June implied by federal funds futures climbed to 34 percent from 30 percent on May 27. They rise to 80 percent by year-end, up from 74 percent three days previously.

Treasuries are shut worldwide Monday in observance of Memorial Day in the U.S. and the Spring Bank Holiday in the U.K., according to the Securities Industry and Financial Markets Association.