Treasuries Fall as Corporate Bond Sales Surge Pre-Blizzard

Updated on
  • More than $25 billion was sold, about half last week’s total
  • Overnight gains led by European bonds erased in U.S. trading

Treasuries fell Monday, pushing yields toward 2017 highs, amid a surge in corporate bond issuance ahead of the Federal Reserve’s March 15 decision on interest rates and a snowstorm forecast for the U.S. Northeast.

The 10-year yield was higher by 3 basis points at 2.60 percent at 2:55 p.m. in New York after erasing a drop of 1.8 basis points. The low was reached concurrently with German and other core euro-zone yields after Belgian Central Bank Governor Jan Smets rejected hawkish interpretation of last week’s policy statement, the Wall Street Journal reported. Treasury yields extended their rebound as corporate issuers sold more than $25 billion of bonds, the second-biggest total this year.

  • Flows in U.S. rate products included large buying in April 10Y futures puts; may represent covering of a short position
  • 9-name corporate bond slate included offerings from Verizon Communications and Humana Inc. with 10Y and 30Y tranches; T-Mobile, Penske, Virginia Electric Power, Everett Spinco and Kuwait also sold 10Y debt
  • IG issuance exceeded $50b in each of the past two week; expectations that this week would be front-loaded were heightened by blizzard forecast 
  • Yields remained below Friday’s YTD highs, reached before February employment data had little impact on expectations Fed will raise rates at its March 14-15 meeting and at least once more this year
  • Trading views on USTs are based on assumptions about whether and how the FOMC will revise its fed funds forecasts for 2017 and 2018
  • Latest weekly CFTC positioning data show speculators extended record front-end shorts, while asset managers cut longs in 5Y