U.S. Treasury yields were mixed on Monday ahead of meetings this week by policy makers for the Federal Reserve, the European Central Bank and the Bank of Japan, as investors see if central bankers will push for easier monetary policy as the global economy comes under pressure.
What are Treasurys doing?
The 10-year Treasury note yield fell 0.7 basis points to 2.086%, while the two-year note yield rose 1.5 basis points to 1.865%. The 30-year bond yield fell 1.4 basis points to 2.578%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
All eyes will fall on the Federal Reserve’s two-day meeting concluding on Wednesday, when it will issue a policy update. The central bank is expected to signal the possibility of an interest-rate cut later this year, with some traders on the fed fund futures market even anticipating a rate decrease this week.
The ECB is holding its forum on central banking in Sintra, Portugal, amid questions on whether it will deliver further policy easing in the next few months after its latest meeting, where ECB President Mario Draghi indicated plenty of measures remained to boost the eurozone. But investors carry doubts whether Draghi still has ammunition to expend after years of implementing ultra-low interest rates and bond-buying program.
Adding to economic concerns around the U.S., the Empire State manufacturing survey recorded its biggest monthly drop in history, falling 26.4 points to a negative 8.6 in June.
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What did market participants say?
“The market is pricing in a 15% chance of a cut on Wednesday, and while I don’t think it happens, I don’t think the 95% pricing of a July cut goes away. The Fed will be as dovish as possible and I think will definitely signal to the market that if we don’t get a trade deal at the G-20, they will act,” wrote David Shiau, senior U.S. rates trader at Jefferies.
What else is on investors’ radar?
Later in the afternoon, the Treasury Department will release its monthly Treasury International Capital report listing the holdings of U.S. dollar-denominated bonds among foreign investors.