Keep an eye on Treasury yields when US markets open
As markets got a taste of what the implications that the trade rhetoric has to offer earlier, Treasury yields barely budged. And instead, 10-year yields are now climbing higher even as stocks and equity futures continue to trade in the red; and as the dollar and the yen recovers a little from earlier losses.
10-year yields are moving back closer towards the elusive 3% level now. They're up 2.4 bps on the day to 2.955% currently. This comes as the US Treasury is set to flood the market with more supply of Treasury bonds this week.
Today, there will be an auction for $45 billion in 4-week bills, $26 billion in 12-month bills, and $35 billion in 3-year notes. Tomorrow, there will be an auction for $23 billion in 10-year notes and on Thursday, there will be an auction for $15 billion in 30-year bonds.
If there is one red flag for markets and one that will see the yen potentially recover further later today, it will be this. So, keep a close eye on how Treasuries will trade later on in the day.
As mentioned many times before, market sentiment remains fragile right now and if we get another negative trade-related headline - one which is more heavy than the earlier one here - then I would expect a stronger reaction that could trigger some bids in Treasuries, and indirectly spur gains in the yen.
