(Bloomberg) — A renewed bout of selling hit the entire Treasury curve, with a slew of companies considering selling bonds before Wednesday’s Federal Reserve rate decision.
(Bloomberg) — A renewed bout of selling hit the entire Treasury curve, with a slew of companies considering selling bonds before Wednesday’s Federal Reserve rate decision.
As Wall Street gears up for the Fed’s 10th consecutive hike since March of last year, around 10 issuers are considering moving forward with debt sales in the US investment-grade primary market Monday. Borrowers are anticipated to pile in during the coming weeks as more companies exit earnings blackouts, with Meta Platforms Inc. said to kick off proceedings with a five-part deal.
These offerings tend to represent a double-whammy for Treasuries, which tend to cheapen amid competition from new debt and as underwriters sell government bonds to rate-lock the issue for corporate buyers. As a result, the two-year yield climbed as much as 10 basis points to around 4.1% Monday. The rate on the 10-year note rose at a slower pace, approaching 3.5%.
Equities posted small moves after notching two straight months of gains, with traders continuing to sift through a batch of corporate results and taking comfort in the fact that JPMorgan Chase & Co. decided to acquire First Republic Bank in a government-led deal for the failed lender.
“The second-largest ever US bank failure is a stark reminder that, although some of the most visible banking sector stress points came in March, the full impacts remain to be seen,” said Will Compernolle, macro strategist at FHN Financial. “Markets are showing a 92% expectation for a 25bp hike on Wednesday, but the bank failure will certainly enter into the meeting’s discussions as the Fed continues balancing the risks between potentially exacerbating banking sector weaknesses through higher interest rates and letting inflation rise higher through a premature rate pause.”
Compernolle expects Fed Chair Jerome Powell’s press conference to stress the Fed’s “meeting-by-meeting” approach to monetary policy even more than usual this week as March bank tension impacts on credit tightening slowly emerge.
Stock market investors holding on to hopes that the Fed will cut rates in the second half could be disappointed later this week, according to Morgan Stanley’s Michael Wilson.
“If the message delivered at this meeting is more hawkish, it could provide a near-term negative surprise for equities,” Wilson wrote in a note
Key events this week:
- US factory orders, revised durable goods, light vehicle sales, Tuesday
- US ADP payroll data, Wednesday
- Federal Reserve Chair Jerome Powell holds news conference following the central bank’s interest-rate decision, Wednesday
- US initial jobless claims, international trade in goods and services, Thursday
- European Central Bank rate decision, followed by ECB President Christine Lagarde’s news conference, Thursday
- US unemployment, non-farm payrolls, Friday
- St. Louis Fed President James Bullard at Economic Club of Minneapolis, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 9:31 a.m. New York time
- The Nasdaq 100 fell 0.2%
- The Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 was little changed
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1025
- The British pound fell 0.1% to $1.2550
- The Japanese yen fell 0.4% to 136.81 per dollar
Cryptocurrencies
- Bitcoin fell 2.6% to $28,597.04
- Ether fell 2.3% to $1,849.18
Bonds
- The yield on 10-year Treasuries advanced five basis points to 3.48%
- Germany’s 10-year yield declined 15 basis points to 2.31%
- Britain’s 10-year yield declined eight basis points to 3.72%
Commodities
- West Texas Intermediate crude fell 1.9% to $75.33 a barrel
- Gold futures rose 0.6% to $2,011.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Mackenzie, Vildana Hajric, Carly Wanna and Isabelle Lee.
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