Treasury yields climb on growth bets, dollar drops

Bloomberg

US Treasury yields climb amid confidence the Federal Reserve will remain accommodative even as robust growth takes the world’s largest economy back to pre-pandemic levels. Stock-index futures were little changed.
Havens including the dollar and government bonds were under pressure while copper, seen as a barometer of growth, surged to the highest in a decade. The US 10-year rate bounced back from its 50-day moving average, underscoring the reflation trade is still alive, but remained below the 1.60% level, sustaining a risk-on bid for global assets including emerging markets.
Investors will focus on corporate earnings and US economic data this week even as the Fed primes them to expect no change to policy at their two-day meeting ending on Wednesday. While emerging economies from India to Brazil are grappling with a Covid-19 surge or renewed curbs, the developed world is on a firmer
recovery path with a faster pace of vaccination.
”We had argued for a likely breakout in bond yields, and continue to believe that equities will be able to tolerate
this repricing, as growth-policy trade-off remains supportive,” JPMorgan Chase & Co. strategists Mislav Matejka, Prabhav Bhadani and Nitya Saldanha wrote in a note. “The phase of activity pickup is ahead of us. At the same time, excess liquidity is likely to stay ample, as policymakers err on the side
of caution.”
Data may show US gross domestic product (GDP) increased at a 6.9% annualised pace from January through March after a more moderate 4.3% rate in the previous quarter. Other reports may show stronger orders for durable goods, a pickup in consumer confidence and robust personal spending. Recent indicators cemented economic optimism, with output at manufacturers and service providers reaching a record high in April.
A slew of earnings from megacaps including Tesla Inc., Facebook Inc. and Apple Inc. will also be parsed this week as investors look for clues on how companies are faring in the
recovery.
European stocks were little changed, as gains for miners and travel companies offset losses for food and technology companies. The dollar extended a two-month low, heading for the biggest monthly loss since November.
Oil retreated amid concern demand from India may fall after the nation reported a million new coronavirus cases
in three days. Gold fluctuated
between gains and losses.
Futures on the S&P 500 Index dipped 0.1% as of 9:25 am London time and the Stoxx Europe 600 Index was little changed.
While the MSCI Asia Pacific Index advanced 0.5%, the MSCI Emerging Market Index gained as much as 0.5%.
The Bloomberg Dollar Spot Index dipped as much as 0.1% and the euro was little changed at $1.2094.
While the British pound advanced 0.3% to $1.3921, the onshore yuan strengthened 0.1% to 6.487 per dollar and the Japanese yen strengthened 0.2% to 107.67 per dollar.
The yield on 10-year Treasuries jumped two basis points to around 1.57% and the yield on two-year Treasuries was
unchanged at 0.16%.
While Germany’s 10-year yield increased less than one basis point to -0.25%, Britain’s 10-year yield increased one basis point to 0.756% and Japan’s 10-year yield climbed one basis point to 0.082%.
West Texas Intermediate crude fell 1.4% to $61.24 a barrel and Brent crude dipped 1.4% to $65.19 a barrel.
Gold strengthened 0.2% to $1,781.27 an ounce.