Today’s Market Update

U.S. Yields Tumble Toward 2% as Draghi Spurs Global Bond Surge
2019-06-18 12:48:35.830 GMT

By Benjamin Purvis and Liz Capo McCormick
(Bloomberg) — The prospect of more stimulus measures from
central banks amid mounting concern about the global economy and
trade hostilities spurred a surge in bond markets worldwide,
helping send the 10-year Treasury yield toward 2%, a level it
hasn’t breached since November 2016.
French, Swedish and Austrian 10-year yields all fell to
zero for the first time ever as European debt rallied, while
investors piled into the U.S. debt market, dragging benchmark
Treasury 10-year yields down by as much as 8 basis points to
about 2.015%. Global bonds have gained amid speculation that the
Federal Reserve and the European Central Bank will soon cut
interest rates. ECB president Mario Draghi said at a conference
in Sintra, Portugal that additional stimulus may be needed if
the economic outlook doesn’t improve.
“Draghi’s comments were one more indication that one of the
major central banks will likely begin another round” of monetary
support, said Mark Grant, chief global strategist at B. Riley
FBR Inc. “This gives the Fed one more reason to consider cutting
rates because the American rates are so much higher than those
in Europe or Japan. U.S. 10-year yields are headed lower.”
Draghi appeared to set a low bar for action on Tuesday when
he said additional support would be needed “in the absence of
any improvement” to the outlook for growth and inflation. Fed
policy makers, who begin a two-day meeting in Washington
Tuesday, are set to deliver their decision on Wednesday, and the
market is pricing in a quarter-point rate reduction by the end
of July.
U.S. President Donald Trump also weighed in again Tuesday,
responding to Draghi’s latest comments by calling out both the
ECB and China over currency weakness.
Bonds rallied around the globe after the ECB chief’s
remarks sent German yields to new record lows, with rates on 10-
year bunds going dropping to as much as 33 basis points below
zero. The equivalent French rate dropped as much as 11 basis
points to zero, while Sweden’s went negative.
“‘Draghi has brought all the tools onto the table, starting
with the rate cuts,” said Salman Ahmed, chief investment
strategist at Lombard Odier Asset Management Ltd . “Treasury
yields are falling because they are not only a function of the
outlook for Fed policy but also the cost of capital. And if
another major central bank starts easing, with U.S. Treasuries
the only thing that yields something now, that comes into play.”

To contact the reporters on this story:
Benjamin Purvis in New York at bpurvis@bloomberg.net;
Liz Capo McCormick in New York at emccormick7@bloomberg.net
To contact the editors responsible for this story:
Benjamin Purvis at bpurvis@bloomberg.net
Mark Tannenbaum

Treasury Yields

Term  Current  Last Month
3 Month2.177%2.373%
6 Month2.176%2.412%
2 Year1.821%2.198%
5 Year1.794%2.173%
10 Year2.034%2.391%
30 Year2.530%2.825%
Yields updated each morning.
Source: Bloomberg

Benchmarks

PRIME5.50%
DJIA26,112.53
Crude Oil$52.18
YEN108.2250
Gold$1,352.50
1 Year CMT2.03%
1 Month LIBOR2.3818%
Fed Funds Effective2.37%
Next FOMC MeetingJune 18th-19th
Source: Bloomberg

Economic Indicator Calendar

DateEventPeriodSurv (M)ActualPriorRevised
06/17Empire ManufacturingJun11.0-8.617.8
Net Long-term TIC FlowsApr$31.0b$46.9b-$28.4b-$25.9b
Total Net TIC FlowsApr-$7.8b-$8.1b-$5.6b
06/18Housing StartsMay1239k1269k1235k1281k
Building PermitsMay1293k1294k1296k1290k
06/19MBA Mortgage Applications14-Jun26.80%
FOMC Rate Decision (Upper Bound)19-Jun2.50%2.50%
06/20Current Account Balance1Q-$124.3b-$134.4b
Initial Jobless Claims15-Jun220k222k
Philadelphia Fed Business OutlookJun10.716.6
Continuing Claims8-Jun1680k1695k
Bloomberg Consumer Comfort16-Jun61.6
Bloomberg Economic ExpectationsJun52.5
Leading IndexMay0.10%0.20%
06/21Markit US Manufacturing PMIJun P50.550.5
Markit US Services PMIJun P51501.9
Markit US Composite PMIJun P50.9
Existing Home SalesMay5.25m5.19m
Existing Home Sales MoMMay1.20%-0.40%
Source: Bloomberg