US 10-year Treasury yields keep rebound from 12-day low amid coronavirus, tapering concerns
- Benchmark US T-bond yields remain firmer amid a quiet Asian session.
- Fed’s Daly backs Vice Chair Clarida, Treasury Secretary Yellen for tapering, rate hike.
- Covid woes escalate but stocks remain mildly bid amid stimulus hopes.
- Second-tier US data, BOE will be in focus, risk catalysts are the key.
10-year US government bond coupon adds one basis point (bp) to 1.195% amid early Thursday’s Asian session. In doing so, the risk barometer holds onto the previous day’s rebound from July 20 amid escalating concerns over the US Federal Reserve’s (Fed) tapering and the Delta covid variant outbreak.
The crucial Treasury yields recovered on Wednesday after Fedspeak and comments from US Treasury Secretary Janet Yellen backed monetary policy tightening. Fed Vice Chair Clarida raised hopes of tapering in 2021 and rate hikes by 2023 if core inflation hits 3% this year while Treasury Secretary Yellen said, per Bloomberg, “By the end of this year inflation will be running at a level consistent with the Fed’s target.”
While extending the tapering chatters were comments from Daly during the PBS Newshour interview who said, per Reuters, that her Modal outlook is that fed will be able to taper later this year or early next year.
It’s worth noting that the COVID-19 woes also underpin the US Treasury yields. Texas marks the biggest one-day increase in covid cases since early February whereas Japan reported all-time high daily infections on Wednesday. Further, Australia refreshes the highest daily infections since August 2020 while the latest virus figures from China were also grim.
Even so, S&P 500 Futures and Asia-Pacific stocks print mild gains as the US policymakers inch closer to further stimulus and there are no major challenges seen so far to the global economic recovery.
Talking about that data, the US ADP Employment Change for July slumped to 330K versus 695K expected and 680K revised down while ISM Services PMI for July jumped to 64.1 versus 60.4 prior and challenged the market bears.
Looking forward, the Bank of England’s (BOE) monetary policy decision and the US Weekly Jobless Claims, coupled with Fedspeak, will be important to watch for immediate direction ahead of the US Nonfarm Payrolls (NFP).