Stocks edge down as yields dip

Bloomberg

Stocks edged lower with US equity futures on Monday, though technology shares outperformed as Treasury yields retreated from recent highs.
The Stoxx 600 Index dropped 0.2%, with tech shares and automakers among the few sectors in the green. Futures on the S&P 500 Index also dipped, while those on the tech-heavy Nasdaq gauge advanced. In Asia, Chinese stocks rallied and Japanese equities slid. The dollar ticked up and oil resumed its decline following the worst week since
October.
The 10-year US Treasury yield falls back to 1.68% from the highest levels in about 14 months following soothing comments from Federal Reserve officials. A slate of auctions this week could be a catalyst for a renewed rise in rates.
Bonds continue to dominate markets, with last week’s Treasury sell-off a stark reminder of investor concerns that a stronger economic recovery could lead to inflation. The jump in yields is also fuelling stock volatility, with investors rotating out of growth and into value shares. Despite reassuring comments from policymakers, some suspect price pressures could force the Federal Reserve to tighten monetary policy sooner than current guidance suggests.
“Clearly, the market is skeptical that the Fed will be able to keep interest rates at current levels for the next three years,” Diana Mousina, senior economist in the multi-asset group at AMP Capital Investors Ltd., said in a note. “We think that nominal bond yields can still shoot higher in the short-term towards 2% and above on inflation concerns. Markets are likely to worry that this move is permanent, rather than temporary.”
Fed Chairman Jerome Powell reiterated in a Wall Street Journal editorial that the central bank will provide aid to the economy “for as long as it takes.” Richmond Fed President Thomas Barkin said in a Bloomberg TV interview Sunday that there is no sign yet of unwanted inflation pressures.
A central-bank exemption that allowed lenders load up on Treasuries and deposits without setting aside extra capital to cushion losses will lapse March 31. The regulator also said it plans further changes to this supplementary leverage ratio, or SLR.
Meanwhile Fed Chair Powell and Treasury Secretary Janet Yellen are expected to make their first joint appearance before the US House Financial Services committee to testify on Fed and Treasury pandemic policies on Tuesday.
Futures on the S&P 500 Index dipped 0.1% as of 8:18 am London time and the Stoxx Europe 600 Index declined as much as 0.2%.
While the MSCI Asia Pacific Index falls 0.2%, the MSCI Emerging Market Index climbed 0.1%.
The Bloomberg Dollar Spot Index rises 0.1% and the euro declined 0.1% to $1.1888.
While the British pound dipped around 0.1% to $1.3855, the onshore yuan was little changed at 6.509 per dollar. The Japanese yen also strengthened 0.1% to 108.72 per dollar.
The yield on 10-year Treasuries falls four basis points to 1.68% and the yield on two-year Treasuries decreased one basis point to 0.14%.
While Germany’s 10-year yield declined three basis points to -0.32%. Britain’s 10-year yield dipped three basis points to 0.812% and Japan’s 10-year yield dipped three basis points to 0.083%.
West Texas Intermediate crude declined 0.9% to $60.86 a barrel and Brent crude decreased 0.7% to $64.07 a barrel. Gold weakened 0.8% to $1,730.97 an ounce.