Bond Brief: Minor Bounce
Updated from 10:37 a.m. EDT
Treasuries ended Monday little changed, and the long end recovered from the previous week's sharp selloff that pushed 10-year bond yields to their highest levels since 2002.
In corporate bonds, Goldman Sachs (GS) said it will sell $1 billion in 30-year bonds as early as this week.
Trading was light as investors face a shortened holiday week in observance of Good Friday. Passover begins at sundown on Wednesday.Moreover, only a handful of midtier economic reports are slated. These include trade balance and business inventories reports for February, as well as March retail sales data. No economic news will be released until Wednesday. "That leaves the U.S. trade deficit as the final economic report of any note in the coming week," a Barrington Research note says. "Given investors' recent accelerated concerns about bond rates, this should be the most closely watched report, except that it seldom gets the attention it deserves. As we've written in past reports, it is the huge and growing hoard of U.S. dollar-denominated assets in foreign hands and the manner in which it is handled that represents the biggest potential shock to U.S. interest rates." The benchmark 10-year note added 4/32 to yield 4.97%, while the 30-year bond climbed 7/32 to yield 5.04%. The two-year note edged higher 1/32 to yield 4.89%, and the five-year rose 2/32 to yield 4.89%. "With long rates finally higher (with core inflation measures lower), the Fed's job has become a bit easier, i.e., the long end is not fighting as much the Fed's effort to tighten," writes David Ader, U.S. bond market strategist at RBS Greenwich Capital, in a research note. "We're not sure how this unfolds. Does it mean the Fed is more comfortable pausing at 5%, or does it force the issue and overshoot? These are not tradeable thoughts for today, this week, but they do contribute to our view that rates are closer to their peak," he writes. "In the meantime, we cannot ignore the reality that higher yields have not inspired buying, and so, until they do or the data turns, we lean to the bearish side." A handful of speeches by Federal Reserve officials will keep the market squarely focused on interest rates, including remarks Tuesday from Dallas Fed President Richard Fisher and Minneapolis Fed President Gary Stern. With regard to the fed funds rate, Fed Governor Susan Bies said Monday, "It's not a slam-dunk how much further we're going."
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