U.S. Treasury yields rose sharply after holiday

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Original title: U.S. Treasury yields rose sharply after the holiday, a large supply of Treasury bonds and corporate bonds triggered a sell-off in the bond market

　　News from the Financial Associated Press (Shanghai, edited by Xiaoxiang),On the first trading day after the U.S. Labor Day holiday, U.S. bond yields rose across the board on Tuesday (September 7), continuing the upward trend following the U.S. non-agricultural employment report last Friday. Analysts pointed out that the scale of corporate bond issuance during the US trading hours exceeded expectations, and the US Treasury Department will also bid for US$120 billion in Treasury bonds this week, triggering a sell-off in the bond market. In addition, European bond yields have also risen sharply before the European Central Bank’s interest rate decision this week. The market expects that the central bank may adjust the purchase of PEPP at this week’s meeting.

　　Market data shows that the 10-year U.S. Treasury yield rose 4.8 basis points to 1.376% on Tuesday, rising for the second consecutive trading day.Yields in other cycles also generally rose. The 2-year U.S. Treasury yield rose 0.8 basis points to 0.23%, the 5-year U.S. Treasury yield rose 3.8 basis points to 0.827%, and the 30-year U.S. Treasury yield rose 4.4 basis points. Reported at 1.989%.

On the U.S. Treasury yield curve, the closely watched two-year and 10-year U.S. Treasury yields reported 115 basis points. Earlier in the market, it hit 116.4 basis points, the widest since July 14.

Data released by the US Department of Labor last Friday showed that the number of new jobs created in the US in August was the lowest in seven months, but the sub-data was quite strong, including a salary increase of 0.6%, twice the expected rate. Although the non-farmer data basically eliminated the possibility of the Fed’s announcement of Taper in September, other data in the report may allow it to reduce its debt purchases by the end of the year as planned.

“The data looks negative on the surface, but the bond market can often see the details. The overall data may be negative, but if you look through it, this data is not enough to cause the reduction of debt purchases to be delayed until next year,” Bryn Mawr Trust fixed income Director Jim Barnes said. “And there will be a supply of new debt this week. These two factors are the most important factors driving up U.S. bond yields.”

On the first day after the Labor Day holiday, US corporate bond issuance became active again overnight. This day has historically been one of the largest issuance days of the year. In the US dollar-denominated corporate bond market, 21 issuers lined up for Tuesday’s issuance. In addition, investors are also waiting for a large number of U.S. Treasury bond auctions this week. In addition to the $58 billion three-year U.S. bond auction on Tuesday, there will be 10-year and 30-year U.S. bond tenders on Wednesday and Thursday, respectively. The total size is 62 billion U.S. dollars.

　　“There is a large supply of bonds in short trading weeks,” said Stefan daniibale, head of US Treasury trading and sales at StoneX Group. “The market seems to be indigestible.”

However, the overall demand for the $58 billion three-year U.S. Treasury auction that was the first to be carried out overnight, the winning interest rate was 0.447%, and the bidding multiple was 2.45. The previous pre-issuance transaction interest rate was 0.45%, and the bidding multiple last month was 2.54. The yield on the three-year U.S. Treasury fell after the auction results were released.

　　The market is also waiting for news on whether the White House will extend the term of Fed Chairman Powell.Some media pointed out that this decision may be made this week.

　　European debt yields rose sharply before the European Central Bank’s decision

　　It is worth mentioning that in the global bond market outside the United States, European bond yields have continued to rise at the beginning of this week and before the release of the European Central Bank’s interest rate decision on Thursday. The outside world believes that the European Central Bank may debate stimulus cuts at its meeting on Thursday.

Reuters’ previous survey showed that the market expects that the European Central Bank’s purchases under the Pandemic Emergency Asset Purchase Program (PEPP) may slow down from the current 80 billion euros per month to 60 billion euros, and then plan 3 early next year. Decrease further before the end of the month.

Piet Haines Christiansen, chief strategist at Danske Bank, said that while the bond purchase plan is being fine-tuned, the European Central Bank may emphasize that it can flexibly increase purchases if necessary, and any slowdown in bond purchases is not a reduction.

European bond yields rose across the board on Tuesday, and the German 10-year government bond yield rose 4.4 basis points to -0.325%, rising to the highest level in seven weeks during the session. Italian government bonds, which benefited relatively a lot from the European Bank’s bond purchase plan, saw the biggest decline. The yield on Italian 10-year government bonds rose 6.3 basis points to 0.752%.

In addition, the French 10-year government bond yield rose 5.1 basis points to -0.022%, the Spanish government bond yield rose 5.1 basis points to 0.366%, and the Portuguese year government bond yield rose 5.6 basis points to 0.252%.

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Editor in charge: Zhao Siyuan