Treasuries start week on calmer footing after losing streak

US government bonds stabilised on Monday after their longest losing streak since 2018.

The yield on the 10-year US Treasury fell 0.06 percentage points to 1.677 per cent, reflecting a pick-up in price. The calm start to the trading week follows seven weeks of rising yields and comes despite the US Federal Reserve’s announcement on Friday that it would not extend a loosening of bank capital requirements that had previously supported the market.

Earlier in the week, the Fed had reiterated that it intended to keep stimulus flowing even in the event of a pick-up in inflation.

“The markets are digesting what the Fed said last week . . . The Treasury yield is elevated from where it has been in the past, but it’s not the near vertical climb that we have seen recently,” said Dean Cheeseman, portfolio manager at Janus Henderson.

The rise in yields has led to volatility in tech-heavy Nasdaq stocks indices. Futures tracking the Nasdaq 100 rose 0.6 per cent on Monday, while those for the S&P 500 fell 0.1 per cent. 

In Europe, the region-wide Stoxx 600 fell 0.2 per cent at the opening bell. The UK’s FTSE 100 lost 0.1 per cent and Germany’s Xetra Dax dropped 0.3 per cent.

Europe’s rollout of Covid-19 vaccines hit a roadblock last week after wrangling over the efficacy and availability of the Oxford/AstraZeneca jab. France recently imposed a new four-week lockdown in Paris, while Italy announced a new lockdown over Easter.

“The only way to get a handle on these more virulent strains is to do a lockdown and that has a knock-on effect on the economy,” said Cheeseman, adding that impediments to the rollout of Covid-19 vaccines would be particularly detrimental to tourism-dependent nations in southern Europe.

Turkish markets took a heavy blow after the country’s president fired the central bank governor.

The price of oil fell on Monday. Brent Crude, the international benchmark, fell 0.7 per cent to $64.10 a barrel and West Texas Intermediate, the US benchmark, slipped 0.5 per cent to $61.14 a barrel. 

In Asia, China’s CSI rose 0.7 per cent, South Korea’s Kospi fell 0.1 per cent and Hong Kong’s Hang Seng was flat.