Treasury yields decreased on Monday as investors awaited data that may indicate the Federal Reserve’s rate path. The 2-year Treasury note yield dropped to 4.708% from 4.748% on Friday at 3 p.m. Eastern. The 10-year Treasury note yield fell to 3.681% compared to 3.737% on Friday afternoon, and the 30-year Treasury bond rate declined to 3.772% from 3.819% late Friday.
Over the weekend, Wagner Group chief Yevgeny Prigozhin led a mutiny by the mercenary paramilitary force in which they took over Russia’s southern military headquarters in Rostov-on-Don. The mutiny began to march towards Moscow before being stopped around 120 miles from the capital amid a deal that would see Prigozhin charged with leading an armed rebellion dropped and him sent to Belarus.
The events had no significant impact on global financial markets, and oil prices only saw a moderate increase. However, analysts cautioned of the potential for future internal strife to lead to market volatility.
Market Outlook
As investors weigh the impact of the recent mutiny in Russia, many are eager to see how financial markets will be affected. With Treasury yields falling slightly, analysts speculate what may come next for the Federal Reserve’s rate path.
Conclusion
Despite the recent news, global financial markets have remained calm, with only a modest increase in oil prices. However, it remains to be seen if future internal strife will continue to have an impact on global financial stability. As always, investors are keeping a close eye on the market’s next moves.
Recession fears deepen as yield curve inversion worsens
Last week saw a deepening of an inversion of the yield curve, as 10- and 30-year Treasury yields fell while short-end yields rose. This has highlighted the concerns surrounding a potential recession. Latest data from Germany’s Ifo Institute suggests that these fears are well-founded; the country’s business-climate index declined to 88.5 in June from 91.5 in May, a figure below the expected level of 90.5.
Furthermore, a flurry of rate hikes by European central banks has only served to increase worry about growth. In contrast, Federal Reserve Chair Jerome Powell stated that a “strong majority” of policymakers were in favour of two further quarter-point rate increases after leaving the fed-funds rate unchanged earlier this month. Investors will be keeping an eye on Powell’s next statement on Wednesday.
Despite the rally being led by the belly of the yield curve, rates across the board are lower as the second quarter moves towards its close. Ian Lyngen and Benjamin Jeffery, rates strategists at BMO Capital Markets, said that “the combination of flagging German business confidence, geopolitical uncertainty linked to the Russian near-mutiny, and reports of lacklustre holiday travel spending in China have combined to push 10-year yields as low as 3.68%”.
