Plummeting oil costs reduced fears of aggressive interest rate hikes, steering yields on 10- to 30-year Treasuries to their lowest marks since September. West Texas Intermediate crude fell 7.4% to finish near $96.50 a barrel as diplomatic talks between the US and Iran pointed toward resolving Middle East supply bottlenecks. The 10-year yield slipped beneath 4.87% during the session, reinforcing the strongest monthly performance for government bonds in more than two years. Meanwhile, market participants are monitoring potential reductions in long-dated debt issuance ahead of the Treasury's quarterly borrowing review.
Key points
Diplomatic willingness between Washington and Tehran to resolve energy disruptions has me…: Diplomatic willingness between Washington and Tehran to resolve energy disruptions has meaningfully reduced oil-driven inflation pressures.
Traders currently expect the Federal Reserve to deliver at least two more quarter-point i…: Traders currently expect the Federal Reserve to deliver at least two more quarter-point interest rate increases through late next year.
Investors are awaiting upcoming quarterly borrowing strategy discussions from US official…: Investors are awaiting upcoming quarterly borrowing strategy discussions from US officials to clarify future long-end debt issuance.
Sources checked by our analysis pipeline: 1
(Bloomberg) -- Treasuries rose, building on their biggest monthly advance in more than two years, as tumbling oil prices eased concern about inflation pressure leading to additional Federal Reserve interest-rate hikes.
Ten- to 30-year maturities led gains, with yields for those tenors declining about four basis points to touch the lowest levels since September.
Shorter-dated debt rose less as lower oil prices helped stabilize US stocks. Equities weakness concentrated in large technology company shares benefited the Treasury market last month as investors piled into lower-risk assets.
“The historical negative correlation between bonds and equities seems to have returned over the past month, and the gains today could be related to investors looking to protect further downside in equities,” said Steven Zeng, an interest-rate strategist at Deutsche Bank. The oil price slide “also supports Treasury yields to move lower.”
The US 10-year yield declined as much as six basis points to under 4.87%, the lowest level since Sept. 10.
West Texas Intermediate futures slid 7.4% to settle near $96.50 a barrel after Washington and Tehran signaled openness to talks to resolve…
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