Long US yield reaches 5.29 per cent as rate expectations pull the dollar lower
The 30-year US Treasury yield hit 5.29 per cent even as June net capital inflows reached 133.5 billion dollars, while softer rate expectations pushed the dollar to a two-month low.
Economics & Markets··Morning
The 30-year yield climbs to 5.29 per cent
The 30-year US Treasury yield rose 3 basis points to 5.29 per cent on Monday, its highest level since 2007 and closer to that year's 5.44 per cent peak, according to The Spokesman-Review. Investors and analysts tie the selloff to a growing national debt, a large supply of long-dated bond sales and inflation that has run above the Federal Reserve's target for five years. Last week the US Treasury sold 25 billion dollars of new 30-year bonds at 5.216 per cent, the highest for such an auction since 2001. Consumer prices rose 3.4 per cent in July from a year earlier. So far this month the 30-year yield has risen 13 basis points while the 2-year rate has fallen 12 basis points. Anshul Pradhan of Barclays said they continue to argue against betting on a reversal of the long-end selloff.[1]
June net capital inflows reach 133.5 billion dollars
Treasury International Capital data released by the U.S. Department of the Treasury show that in June the sum of net foreign acquisitions of long-term securities, short-term US securities and banking flows was a net inflow of 133.5 billion dollars. After adjustments, net foreign acquisitions of long-term securities came to 172.7 billion dollars. Private inflows were recorded at 85 billion dollars and official institution inflows at 48.4 billion dollars. In long-term securities, private foreign investors made net purchases of 169.8 billion dollars and official institutions net purchases of 37.3 billion dollars. In Treasury bonds and notes, private investors bought a net 16.6 billion dollars while official institutions sold a net 9.8 billion dollars. The release carries no country breakdown.[2]
Softer rate bets pull the dollar lower
In a Reuters poll conducted from August 12 to 17 and reported by Kitco News, 94 of 104 economists — 90 per cent — said the Federal Reserve would leave its policy rate in the 3.50-3.75 per cent range at the September 15-16 meeting, a view they have held for months. After unexpected job losses in July, market pricing flipped toward a near 70 per cent chance of a hold in September rather than an increase, though markets still price one increase by the end of December, with the conflict between the US and Iran in its sixth month and oil prices about 25 per cent above pre-war levels. Several Federal Open Market Committee members have signalled that tighter policy could still be needed if inflation stays elevated after a meeting last month in which three members dissented in favour of an increase. On the same Monday the dollar fell to its lowest level in more than two months as investors trimmed expectations of a US rate increase after softer economic data, leaving the euro at a two-month high around 1.1614 dollars, up 0.18 per cent on the day. The yen strengthened 0.13 per cent to around 159.15 per dollar. Investors are looking to the Jackson Hole symposium next week for clues on how policymakers read the latest data.[3], [4]
