US Futures Steady, 2Y Treasury Yields Rise: Market Watch

(Bloomberg) — Short-term Treasury yields rose for the second day in a row, and US stock futures held steady as concerns about the US banking sector eased and rising inflation supported bets on further Federal Reserve rate hikes.

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Yields on 2-year Treasury bonds – the most sensitive to policy action – rose 11 basis points to 4.36%, adding 27 points to Tuesday’s gain, while the 10-year bond rate remained virtually unchanged at 3.69%. S&P 500 and Nasdaq 100 contracts fluctuated between small gains and losses. The dollar strength indicator rose after four days of decline.

Swap prices are back in position for the Fed to raise rates by a quarter of a percentage point next week after the chances of a hike dropped to almost 50-50 on Monday. The closely watched core consumer price index rose 0.5% in February, slightly above the average estimate of 0.4%, and enough to put pressure on policy makers.

“We think inflation has peaked and the Fed will raise rates again by 25 basis points, and that’s it,” Mark Matthews, head of Asian research at Bank Julius Baer & Co., told Bloomberg TV.

The European stock index Stoxx 500 fell about 0.4%, with energy companies among the biggest declines after a sharp drop in oil prices this week. Bonds across Europe fell, with German two-year yields up 12 basis points to over 3%.

Traders also digested a plethora of economic data from China, where retail sales rose as expected, while industrial production was slightly lower than forecast. The People’s Bank of China added more liquidity than expected, while keeping its key interest rate unchanged. The rise in home sales was one clear positive signal reflected in the rally in the mainland real estate index.

Financials were among the largest on Wednesday in Tokyo and Hong Kong, where the Hang Seng index rose more than 1%. US stocks rose by Tuesday’s close, which contributed to a change in sentiment in Asia.

Comments from ratings companies on the financial sector underscore that sentiment is likely to remain volatile after the biggest US bank failures since the financial crisis.

Moody’s Investors Service lowered its sector outlook following three banking collapses in the past few days. First Republic Bank triggered a halt in volatility after S&P Global Ratings placed the company in the negative watch zone.

Elsewhere, oil rose from its lowest close in three months as traders gauged the demand outlook. Gold withstood the fall, which partially softened a three-day gain of more than 5%.

Key events of this week:

  • Eurozone industrial production, Wednesday

  • US Inventories, Retail Sales, Producer Price Index, Manufacturing Empire, Wednesday

  • Eurozone rate decision, Thursday

  • US Housing Construction, Initial Jobless Claims Thursday

  • Janet Yellen appears before the Senate Finance Committee on Thursday.

  • US University of Michigan Consumer Sentiment, Industrial Production Leading Index Conference Board, Friday

Some of the major movements in the markets are:

Stock

  • The Stoxx Europe 600 was down 0.5% as of 8:08 am London time.

  • S&P 500 futures fell 0.1%

  • Nasdaq 100 futures remain virtually unchanged

  • Dow Jones Industrials futures fell 0.2%

  • The MSCI Asia Pacific index rose 0.6%.

  • The MSCI Emerging Markets Index rose 0.8%.

Currencies

  • Spot Bloomberg Dollar Index up 0.2%

  • The euro remained unchanged at $1.0733.

  • The Japanese yen fell 0.5% to $134.94 per dollar.

  • The offshore yuan fell 0.2% to 6.8966 per dollar.

  • The British pound was almost unchanged at $1.2150.

Cryptocurrencies

  • Bitcoin rose 1.3% to $24,960.28.

  • Ethereum was up 0.2% to $1,708.7.

Bonds

  • The yield on 10-year Treasuries remained virtually unchanged at 3.69%.

  • The yield on German 10-year bonds rose eight basis points to 2.50%.

  • The yield on British 10-year bonds rose six basis points to 3.55%.

Goods

  • Brent crude rose 1.3% to $78.47 a barrel.

  • Spot gold fell 0.7% to $1,890.42 an ounce.

This story was produced with the assistance of Bloomberg Automation.

–With the assistance of Tassia Sipahutar.

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