Reply To: Bond Traders Weekly Outlook: Continued Under Performance By 2-yr Note


U.S. Treasuries started March with a midweek retreat that was paced by shorter tenors.

The Treasury complex faced pressure from the start after overnight action was headlined by the release of China’s Manufacturing PMI (actual 52.6; expected 50.5), which hit its best level since 2012. The report overshadowed contractionary readings from Japan (actual 47.7; expected 47.4) and the eurozone (actual 48.5, as expected) while the February ISM Manufacturing Index for the U.S. improved (actual 47.7%; consensus 47.8%; prior 47.4%) but remained in contractionary territory.

Treasuries began widening their losses shortly after the start, accelerating to fresh lows after today’s second batch of data, which included the ISM Manufacturing Index.

In addition, the market responded to hawkish comments from Minneapolis Fed President Kashkari, who is a voter on the FOMC this year, and said that wage growth is too high, and that inflation must be cooled.

The Treasury complex reached lows around 11:00 ET while the next hour saw a rebound that was paced by the long bond while shorter tenors resisted, remaining closer to their lows.

Today’s selling lifted the 10-yr yield to its highest level since early November while the 30-yr yield touched its highest level since December 30 (3.984%) but finished a bit below that mark

2-yr: +10 bps to 4.90%
3-yr: +11 bps to 4.62%
5-yr: +10 bps to 4.26%
10-yr: +8 bps to 3.99%