Bond Traders Weekly Outlook: Higher for Longer Threatens Long Duration Portfolios

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    Treasury yields have been climbing.

    The 2-yr note yield is up seven basis points to 4.94% and the 10-yr note yield is up five basis points to 3.86%.


    U.S. Treasuries are mixed with shorter tenors expected to show slight relative strength while 10s and 30s are set for a slightly lower open.

    Overnight action saw the release of mostly disappointing Services PMI readings from major economies, though most readings remained in expansionary territory.

    China’s Ministry of Commerce announced that foreign entities will have to request permission to export gallium and germanium, two metals vital to electronics manufacturing, from China. Germany’s Economy Minister Habeck warned that it would be a problem for Germany if China extended these restrictions to include lithium.

    In the U.S., UPS employees are on track for strike action after negotiations with teamsters collapsed.

    Crude oil is revisiting its 50-day moving average (71.48) while the U.S. Dollar Index is up 0.2% at 103.18.

    2-yr: UNCH at 4.92%
    3-yr: UNCH at 4.57%
    5-yr: UNCH at 4.19%
    10-yr: +1 bp to 3.87%
    30-yr: +2 bps to 3.89%


    Early Bonds Treasury yields jumped in response to the hot data. The 2-yr note yield, at 4.96% just before the 8:15 a.m. ET ADP release, is up 14 basis points to 5.08% now. The 10-yr note yield, at 3.97% before the ADP number, is up 11 basis points to 4.05% now.

    According to ADP, private sector hiring increased by 497,000 in June (consensus 245,000) following a downwardly revised 267,000 (from 278,000) in May. Jobs in the goods-producing sector increased by 124,000 while jobs in the service-providing sector surged by 373,000. Small and medium businesses led the hiring, registering gains of 299,000 and 183,000, respectively, versus a decline of 8,000 positions at large establishments.

    Separately, initial jobless claims for the week ending July 1 increased by 12,000 to 248,000 (consensus 245,000). Continuing jobless claims for the week ending June 24 decreased by 13,000 to 1.720 million.
    The key takeaway from the report is much the same: initial jobless claims — a leading indicator — continue to run well below recession-like levels.

    2-yr: +12 bps to 5.06%
    3-yr: +14 bps to 4.76%
    5-yr: +14 bps to 4.40%
    10-yr: +9 bps to 4.04%
    30-yr: +5 bps to 3.99%


    U.S. Treasuries in a volatile week saw the 5-yr note and shorter tenors reclaim some of their losses from Thursday after the stronger than expected AD
    [See the full post at: Bond Traders Weekly Outlook: Higher for Longer Threatens Long Duration Portfolios]

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