U.S. Treasury Yields Rise Modestly on Profit Booking

U.S. Treasury Yields Rise Modestly on Profit Booking

29 April 2016, 16:00
Roberto Jacobs

U.S. Treasury Yields Rise Modestly on Profit Booking

The U.S government bonds slumped as investors booked profit on last day of the week after long weekly rally due to FOMC decision. Also, firm crude oil prices drove investors from safe-haven assets. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, moved higher 1.96 pct to 1.874 pct and the yield on the 2-year Treasury bond rose 2.08 pct to 0.805 pct by 1230 GMT.

Yesterday, the United States Q1 GDP rose 0.5 pct q/q (annualized), lower than the market expectation of 0.7 pct q/q, from 1.4 pct in the previous quarter. Similarly, personal consumption increased 1.9 pct, against market anticipation of 1.7 pct, from 2.4% in the last quarter of 2015. Moreover, exports tumbled 2.8 pct, from prior down 2 pct, alongside a 0.2 pct increase from imports. Business investments also decline 5.9 pct, alongside the deceleration seen in the headline measure, this report clearly reflects the weaker tone of data seen to open the year. Although a number of releases continue to reflect current economic dampness, the potential for a rebound in inventories in the months ahead should provide a boost to growth as we move further into 2016.

Today the crude oil prices touched to 6-month high due to weak dollar and decline in United Sates output. Mainly, a weaker USD normally adds to an ascent in oil costs, since oil is priced in USD. At the point when the dollar debilitates against different other currencies, oil gets to be less expensive to purchase, pushing up demand. The International benchmark Brent futures rose 0.59 pct to $48.06 and West Texas Intermediate (WTI) climbed 0.91 pct to $46.45 by 1130 GMT.

Federal Reserve officials on Wednesday left interest rates unchanged and provided no hint of a hike at the June meeting. Mixed global economic signals and low inflation combined with Brexit uncertainties probably clouding the move. Esther L. George was the lone dissenter, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

In the statement that followed, the Fed didn’t send any message about when the next increase could come. Fed's cautious stance underscores policymakers' lack of confidence in moving away from extraordinary easy-money policies without undermining the fragile U.S. expansion and knocking the global economy off balance. Policymakers have made room till their June 14-15 gathering to see enough encouraging developments before they act.

The statement was marginally more positive, in line with economic data. The tone of the statement was unchanged but the Committee dropped hints on its worries and what's holding it back. It noted that data since March indicates that labor market conditions have improved further even as growth in economic activity appears to have slowed. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. Meanwhile, S&P 500 Futures fell 0.14 pct to 2,096.50 by 1230 GMT.

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