NEW YORK, Nov 7 (Reuters) – U.S. Treasury yields rose in choppy trade on Monday after a highly volatile week as bond investors focused on the most important inflation data and the U.S. midterm election. – Tuesday’s mandate that will determine control of Congress.
The past week has seen market swings amid another big interest rate hike from the Federal Reserve and a strong US jobs report for October, ensuring the Fed won’t be pressured to back away from its aggressive monetary policy tightening.
At a press briefing last week, Fed Chairman Jerome Powell warned against prematurely discussing a pause in rate hikes in the face of still-high inflation.
US two-year yields, which are sensitive to expectations of rate movement, rose nearly 7.2 basis points to 4.7237%.
Ellis Phifer, managing director of fixed income research at Raymond James in Memphis, Tennessee, said Monday’s selloff in Treasuries was likely due to “a combination of the overhang from the president’s testimony and the ‘future, just nervousness about the CPI’.
U.S. consumer price index data for October is due out on Thursday, with investors awaiting the report for further clues on when the Fed might ease the pace of rate hikes. Wall Street economists expect the monthly and annual core consumer price index to decelerate to 0.5% and 6.5%, respectively, according to a Reuters poll.
“While we see greater downside risks in October, we believe this would be due to one-time factors that would likely reverse in the coming months,” PIMCO economists Tiffany Wilding and Allison Boxer wrote in a note. of research.
Investors are also keeping a close eye on Tuesday’s U.S. midterm elections.
Republicans have gained momentum in polls and betting markets, with analysts predicting a divided government in which Republicans will take control of the House of Representatives and possibly the Senate. This outcome would likely hamper Democratic President Joe Biden’s economic agenda.
A divided government could lead to a stalemate over raising the federal debt ceiling, possibly reigniting concerns about a U.S. default, analysts said, a scenario that could boost backstop bids for Treasuries .
“A deadlock can be good for the bond market if you don’t have to worry about one side applying lots of stimulus,” Raymond James’ Phifer said.
The yield on 10-year Treasury bills rose 5.3 basis points to 4.211%.
Yields on the 30-year US Treasury rose 6.5 basis points to 4.312%.
A closely watched part of the US Treasury yield curve measuring the spread between two- and 10-year Treasury yields remained inverted at -51.9 basis points.
An inversion of this part of the curve generally heralds a US recession.
This week, the Treasury will auction $40 billion in three-year US bonds on Tuesday, $35 billion in 10-year bonds on Wednesday and $21 billion in 30-year bonds on Thursday. The $96 billion auction set will bring in about $40.7 billion in new funds when they settle Nov. 15, Jefferies wrote in a research note.
November 7 Monday 2:58 p.m. New York / 1958 GMT
Reporting by Gertrude Chavez-Dreyfuss; Editing by Paul Simao and Chizu Nomiyama
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