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US Treasuries have begun the week with prices declining and yields rising, ahead of some important speeches by policy officials and further data releases.
Benchmark ten-year Treasury yields rose 3.2 basis points to 2.44 per cent in early trading on Monday.
Treasury yields have edged higher in recent days with most analysts pointing to renewed optimism over economic stimulus coming from the new administration. Additional hopes for softer financial regulation were bolstered last week with the announcement that Governor Daniel Tarullo will be stepping down from the Federal Reserve Board in April. Mr Tarullo has been widely considered to be key to a lot of the financial reform that has been implemented in response to the financial crisis.
Despite the rise in yields over the past few days, a number of analysts believe yields could still decline. JPMorgan analysts have re-iterated their view that the market is likely to be disappointed by the scope and timing of fiscal stimulus from Mr Trump. In addition, if sentiment wobbles again, a number of investors that have bet on rapidly rising interest rates could look to cover themselves by buying Treasuries, pushing prices up and yields down.
“Any further disappointment in fiscal stimulus should result in short covering, likely driving yields lower,” said the analysts.
Janet Yellen, chair of the Fed, will address the US Senate on Tuesday and House on Wednesday, with a smattering of other board members also delivering speeches on those days. It comes alongside inflation, retail and employment data releases, as well as fresh housing updates.
“The Chair’s testimony is likely to be relatively balanced: we do not expect her to deviate significantly from [this month's] FOMC statement, or give any indication the Fed is ready to raise rates imminently,” said JPMorgan’s analysts.
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