U.S. Treasury revenue fell Thursday morning after the House of Representatives passed the $ 1.9 billion stimulus bill, ahead of weekly unemployment claims.
The yield on the standard 10-year treasury note dropped to 1.48% at 4 a.m. ET. The return on the thirty-year treasury bonds fell to 2,221%. Returns move inversely to prices.
This comes after a major ten-year auction on Wednesday eased investors’ concerns about a drop in demand for government debt.
Investors will watch Thursday’s auction of $ 24 billion in 30-year bonds, as a measure of demand for longer-term government debt. Auctions will also be held on Thursday for $ 30 billion in four-week accounts and $ 35 billion in eight-week accounts.
Weekly data on unemployment claims must be released Thursday at 8:30 p.m. Economists polled by Dow Jones expect 725,000 new claims.
Meanwhile, data showing the number of posts in January is expected to be released at 10 a.m. ET.
When it comes to the a stimulus package, Willem Sels, chief investment officer, private banking and wealth management at HSBC, said the bond market was trying to evaluate whether it would be inflationary. Bond yields have risen sharply in recent weeks amid fears of rising inflation.
“In our view, however, inflation has been rising mainly due to oil prices, temporary bottlenecks on supply and the weakening of the US dollar in recent months,” Sels said.
The US government’s spending package was actually ‘probably more deflationary than inflationary’, he argued, adding that he believed the bond market had ‘sold too much in anticipation of the fiscal package’.
Meanwhile, Charalambos Pissouros, senior market analyst at JFD Group, emphasized that although the February consumer price index rose on an annual basis on Wednesday as expected, the core rate actually tapped lower.
“It gives more confidence in the Fed’s view that it will take a while before inflation rises and stays above 2% for some time,” he said, pointing to the central bank’s forecast that over the years after 2023 will happen.
“It also confirms our view that the recent decline in equities due to higher returns was only an affirmative phase, and that it would likely bounce back and move further north,” Pissouros said.
However, not everyone is convinced, with ING senior tariff strategist Antoine Bouvet telling OilGasJobz on Wednesday the ten-year US Treasury yield is likely to rise by 2% by the end of the year, but could rise ‘far above’ in the second quarter.
– OilGasJobz’s Jesse Pound contributed to this report.