January 29, 2018, by Lorcan Roche Kelly
The 10-year Treasury traded with the highest yields since April 2014 this morning, while the yield on the German five-year bond moved above zero for the first time since December 2015. The selloff comes as the dollar halts its recent slide ahead of a busy week for fixed-income investors. On Wednesday, the Federal Reserve may shift its language to a more hawkish tone in Janet Yellen’s last meeting as chair, according to Goldman Sachs Group Inc. Friday brings payrolls data for January, which should give the first clear view of the U.S. economy after a disappointing end to 2017.
Hedge funds reported record wagers on continued price increases for both U.S. and global benchmark crude prices as the oil market remains a one-way bet for investors. Last week, drillers in the U.S. added the most rigs since March 2017 as oil remained close to the highest level in three years. A barrel of West Texas Intermediate for March delivery was trading at $66.10 by 5:40 a.m Eastern Time.
British Prime Minister Theresa May is again under pressure from rebel members of her own party as the U.K. government seeks to find common ground on a Brexit position ahead of the start of talks on the ‘transition phase’ of the country’s exit from the European Union. She already faces calls to sack Chancellor of the Exchequer Philip Hammond after he suggested a softening of the terms of the divorce after her approach came under criticism. Analysts suggest that politics may start moving the pound lower this week following a gain of more than 4 percent this month.
Overnight, the MSCI Asia Pacific Index slipped 0.1 percent, while Japan’s Topix index closed 0.1 percent higher as investors waited for data this week. In Europe, the Stoxx 600 Index was 0.2 percent lower at 5:40, with consumer staples the worst-performing sector. S&P 500 futures slipped 0.3 percent, the 10-year Treasury note yielded 2.71 percent and gold was down.
While the big economic number this week is the January payrolls data on Friday, there are some important releases today. At 8:30 a.m., the core PCE deflator, Federal Reserve’s preferred inflation gauge, is published: expectations are for it to remain unchanged at 1.5 percent. Personal spending is projected to slow to 0.4 percent, with incomes rising 0.4 percent. The U.S. is expected to publish a list of Russian oligarchs with connections to Vladimir Putin later today, with the risk of increased sanctions putting pressure on that country’s bonds.