Treasury yields fell Thursday as investors brace for a European Central Bank meeting that is expected to see President ECB Mario Draghi emphasize plans to ease policy later this year.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -1.61% fell 1.9 basis points to 2.031%, while the 2-year note rate TMUBMUSD02Y, -0.87% retreated 1.8 basis points to 1.808%. The 30-year bond yield TMUBMUSD30Y, -1.01% was down 1.4 basis points to 2.564%. Debt prices move in the opposite direction of yields.
What’s driving Treasurys?
Expectations for the ECB to open the door to rate cuts are running high after Draghi had hinted at his willingness to loosen policy in June. The ECB President said the central bank still had plenty of easing measures it could still unroll, countering skeptics who said the ECB no longer had tools to bolster the eurozone .
See: Why the European Central Bank is getting ready to cut rates
Analysts say the continued tide of tepid data coming out of the export-dependent economic bloc underlined the need for ECB action. A subdued business sentiment indicator from Germany underlined its growth doldrums, coming after a slew of weak purchasing manager survey readings for the eurozone on Wednesday.
In U.S. data, weekly jobless claims, durable goods orders for June, and advanced trade data from last month was set for release at 8:30 a.m. Eastern.
What did market participants’ say?
“We expect the ECB to prepare the ground for rate cuts later this year through a change in the forward guidance to imply an easing bias,” said Peter Schaffrik, global macro strategist at RBC Capital Markets.
“We also expect President Draghi to lay out arguments why the -40bp lower bound is no longer the floor for the deposit rate and why rates can stay at very low rates for much longer than implied in markets,” said Schaffrik.
What else is on investors’ radar?
The governor of the Reserve Bank of Australia Philip Lowe also said he stood ready to cut interest rates in the coming months. The Australian central bank has cut its benchmark cash rates by 25 basis point each in June and July, leaving it at a record low of 1%.
The Treasury Department will hold the last of its three debt auctions later at 1 p.m., issuing $32 billion of 7-year notes. The past few auctions have struggled to draw investor appetite, but uncertainty around global economic growth have kept long-term yields anchored.
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