US government bonds rose on Tuesday, pushing 10-year Treasury yields to their lowest level in four months as investors lifted their bets on tightening monetary policy and responded to disappointing service industry surveys.
The yield on the benchmark 10-year Treasury note fell 0.07 percentage points to 1.36%, the lowest level since the end of February, when people were worried that the economy would rebound rapidly. inflation Begin to have repercussions in the financial market.
The 10-year Treasury bond yield is inversely proportional to the price. Earlier this year, it soared to 1.77%, as investors began to expect the central bank to respond more positively. U.S. Federal Reserve To curb rising inflation.
Tuesday’s trend added impetus to the long-term U.S. Treasury bond rebound that began on Friday, when government data showed U.S. recruitment speeds up, But the speed is not enough to prompt the central bank to change its policy. The Fed’s ultra-loose monetary policy, including historically low interest rates and large-scale bond purchase programs, has been a key factor in keeping borrowing costs low and raising other asset prices.
Data released by the Institute for Supply Management, which tracks service industry activity, on Tuesday exacerbated the impact on government debt, which tends to perform well in times of increasing uncertainty. Data show that the business and employment situation in the service industry in June has weakened compared with the previous month. ISM cited company comments that it is difficult to find qualified candidates to fill vacant positions.
Ian Lyngen, an interest rate strategist at BMO Capital Markets, said: “The ISM data just adds more momentum to the continued decline in Treasury bond yields.” “A large part of what we are seeing is a surrender of higher interest rate theory.”
The country’s market indicators of expected future inflation also fell on Tuesday, with the so-called 10-year breakeven ratio dropping to 2.33%. As traders turn to bonds, the yields of other long-term Treasury bonds (including 20-year and 30-year Treasury bonds) have also declined. The fall pushed the yield differential between the policy-sensitive two-year Treasury bond and the 10-year Treasury bond to its lowest level since February.
These measures have hit the US$50 trillion U.S. stock market, where the stock prices of large industrial products companies, oil giants, and large banks have fallen. These three sectors have been boosted by expectations of faster growth this year, and large banks have also risen as investors bet higher interest rates will help increase earnings. The benchmark S&P 500 index fell 0.7%, then slowed down in the late afternoon, closing the day down 0.2%.
Andrew Brenner, head of international fixed income at National Alliance Securities, said: “As the stock market has been hit hard, the U.S. Treasury market is under bidding.”
Investors turned to large technology groups such as Apple and Oracle, which thrived during the pandemic and were considered less sensitive to economic fluctuations. The move helped contain the decline in the Nasdaq Composite Index, which closed up 0.2% on the day.