(Bloomberg) — U.S. Treasuries are on track to rise for the first time in a week as U.S. data will provide a glimpse into the health of the manufacturing sector.
The yield on the 10-year U.S. Treasury note fell 3 basis points to 4.17%, while the yield on the 2-year Treasury note, which is more sensitive to monetary policy, fell 2 basis points to 3.46%. Money markets have already welcomed the Fed cutting borrowing costs by a quarter of a percentage point twice this year, with the likelihood of a third rate cut about 30%.
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Data later on Monday could show the ISM manufacturing index could rise to 48.4 in December from 48.2 in November, according to a Bloomberg survey of economists. In the same survey, the price paid component is expected to climb to 58.7 from 58.5.
Crude oil futures fell on Monday and most bonds around the world rose on concerns about a global supply glut. Any recovery in Venezuelan oil production will come amid a decline in output over the past two decades, leaving the market facing a huge surplus this year as OPEC+ and others add more oil output. Oil prices have since stabilized as traders weigh the future of Venezuelan output.
U.S. stock futures were higher on Monday, driven by gains in technology stocks, although rising geopolitical concerns tend to fuel demand for safe-haven assets such as U.S. Treasuries. U.S. cash bonds also lagged swap bonds, a sign of stronger risk appetite.
“Historically, geopolitical shocks tend not to have much lasting impact,” Deutsche Bank strategists including Henry Allen wrote in a client note. “This may seem surprising, but that’s because markets typically trade on macro variables such as growth and inflation, rather than geopolitical shocks themselves.”
(Full text updated)
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