Treasury prices fell Monday, lifting yields, as the Trump administration said it would end waivers for countries importing Iranian oil, reports of which had helped to driven crude prices higher.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, +0.52% rose 2.9 basis points to 2.592%, while the 2-year note yield TMUBMUSD02Y, -0.13% was up 0.7 basis point to 2.391%. The 30-year bond yield TMUBMUSD30Y, -0.29% was up 3.1 basis points to 2.994%. Bond prices move inversely to yields.
What’s driving the market?
Treasurys are coming under pressure as oil prices surge, which could give rise to inflation, a bugaboo of bond investors wary of its corrosive influence on the value of fixed-interest payments. West Texas Intermediate crude CLK9, +2.59% settled up by more than 2% on Monday, resulting in its highest finish in nearly six months.
The U.S. had previously granted eight countries a six-month exemption to continue buying Iranian crude, set to expire May 2, despite U.S. sanctions, but President Donald Trump’s administration announced on Monday that it wasn’t renewing those waivers, pushing oil prices to fresh highs.
Trump said in a tweet that Saudi Arabia and other members of The Organization of the Petroleum Exporting Countries will make up the shortfall from Iran’s reduced shipments.
See: Oil prices jump over 2% on expectations U.S. will halt waivers on Iran oil imports
Economic data will command investors’ attention this week as many eagerly await the first read of first-quarter gross domestic product data. Analysts polled by MarketWatch are expecting the economy to grow at an annual pace of 1.5% in the first three months of the year.
What are market participants saying?
“Traders apparently don’t believe reports the U.S. hopes to make up for the oil supply differential with replacements from Saudi Arabia and the [United Arab Emirates],” said Jim Vogel, an interest-rate strategist at FTN Financial, in a Monday note.
“Depressed oil prices were one of the key arguments that convinced investors in the fourth quarter that global growth truly was sliding,” said Vogel.
What else is on investors’ radar?
Existing home sales fell to a 5.21 million annual pace in March, below analysts’ forecasts of 5.35 million. Investors are closely eyeing the housing sector’s health as it could demonstrate if the Federal Reserve’s decision to pull back from further rate hikes this year is feeding its way into industries highly influenced by the level of interest rates.
This week will also offer a raft of government debt auctions by the Treasury Department, which is set to sell $112 billion of bonds across the 2-year, 5-year and 7-year maturities.
Read: The stock market’s progress to a fresh record hinges on a key gauge of economic growth
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