Bond Report: Treasury yields hold ground as traders watch for geopolitical jitters

Treasury yields struggle for direction on Monday as investors eyed developments around Britain’s planned exit from Europe’s trade bloc and Libyan military clashes. A key inflation reading later this week is also on investors’ radar. Read More...

Treasury yields struggled for direction on Monday as investors eyed developments around Britain’s planned exit from Europe’s trade bloc and Libyan military clashes. A key inflation reading later this week was also on investors’ radar.

The 10-year Treasury note yield TMUBMUSD10Y, -0.39% was virtually unchanged at 2.503%, after trading as low as 2.485%. The 2-year note TMUBMUSD02Y, -0.17% was down 0.6 basis point to 2.339%. The 30-year bond yield TMUBMUSD30Y, -0.04% was up 0.6 basis point to 2.915%. Bond prices move inversely to yields.

Jitters from Libya put investors on edge as civil war threatened to break out again in the country. The U.S. military said it would pull its military forces, which has been stationed in the country to combat Islamic State. The unrest has crimped oil production, lifting crude prices.

In Europe, U.K. Prime Minister Theresa May was attempting to gather support among the European Union for an extension of Brexit.

See: Oil taps fresh 5-month highs amid Chinese buying, Libyan conflict

“Bond yields are lower and Asian equity indices are mixed as the week starts with unrest in Libya as a backdrop and Friday’s…payroll data largely forgotten or ignored,” wrote Kit Juckes, a global macro analyst at Société Générale.

In economic data, investors will see February’s factory orders at 10 a.m. Eastern time. But the key highlight of the week will be March’s consumer-price index data that could indicate if inflation growth is bottoming out. Inflation is anathema to bonds because it can chip away at the fixed value of owning government paper.

“If the Fed wants to see the whites of the eyes of the inflation monster before hiking, there is absolutely no pressure to act. This week’s CPI data are unlikely to change that,” said Juckes.

Japanese bond yields retreated after the Bank of Japan cut its assessment for several economic regions as the global growth slowdown weighed on its manufacturing and export industries. The 10-year Japanese government bond yield TMBMKJP-10Y, -57.82% fell 1.6 basis points to negative 0.05%.

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