US Treasury bonds fell for the third day in a row on Monday, continuing to reduce last week's gains due to signs of easing inflationary pressure.
Longer-term bonds led the decline. As of 9:44 a.m. New York time, 30-year bonds were down 2 basis points. A wave of sales in the futures market boosted the decline. At around 8:20 a.m., 20,000 10-year treasury bond futures changed hands within the three-minute window.
There was no economic data to stimulate market position adjustments on Monday. Investors turned their attention to comments from several Federal Reserve officials and the issuance of a series of investment-grade bonds, as companies wanted to issue bonds before the upcoming holiday weekend. The US inflation report released last week helped push the US Treasury bond market up for the third week in a row. The market expects the easing of price pressure to allow the Fed to cut interest rates twice this year.
“The issuance of corporate bonds seems to be heating up a bit this morning. From a technical perspective, this may put pressure on the wider market,” said Zachary Griffiths, head of US investment grade bonds and macro strategy at CreditSights. “We have seen some sell-offs in the futures market. Although the economic data is quiet, the Federal Reserve is speaking a lot.”
Federal Reserve Vice Chairman Michael Barr said interest rates should be kept unchanged. Atlanta Federal Reserve Governor Raphael Bostic said that the “stable state” of US interest rates in the future may be higher than before.
Market prices now reflect interest rate cuts of about 40 basis points before the end of the year, and the market has fully absorbed the first rate cut in November.
However, there are signs that the futures market is showing new signs of shorting US Treasury bonds. The sharp rise in 2-year and 5-year treasury bond futures trading activity is in line with the establishment of new short positions by traders postponing expectations of the Federal Reserve's interest rate cut.