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Yields jump before new supply, heavy data week

Traders at the CME Group's Chicago Board of Trade
Tim Boyle | Bloomberg | Getty Images
Traders at the CME Group's Chicago Board of Trade

U.S. Treasury yields rose on Monday before the U.S. government will sell $64 billion in new debt this week, and ahead of a number of economic releases that will give new insight into the pace of U.S. growth.

The Treasury is due to sell $24 billion in three-year notes on Tuesday, $24 billion in 10-year notes on Wednesday and $16 billion in 30-year bonds on Thursday, with corporate and other supply also weighing on the market.

A number of data releases, including retail sales for April released on Wednesday, will also be scrutinized for signs of economic strength and whether inflation is picking up, as some believe is likely.

Symbol
Yield
 
Change
%Change
US 3-MO
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US 1-YR
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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"There is a lot of data event risk coming up because there are so many releases that are of relatively high impact. I can see some selling just as a general point of risk aversion," said Thomas Simons, a money market economist at Jefferies in New York.

Import and export price data for April is also due on Wednesday, producer price data for April will be released on Thursday and industrial production for April is scheduled for Friday.

Benchmark 10-year note yields were at 2.2618 percent, up from 2.15 percent late on Friday. Thirty-year bond yields were at 3.0227 percent, up from 2.90 percent.

Continuing weakness in German government bonds also dragged U.S. Treasury yields higher. German bund yields have spiked in the past week and a half as a rebound in oil prices led some investors to reevaluate expectations that inflation will stay low. Crowded positioning, with most of the market having bet on continued German bond strength, added to the pace of the sell-off once it began.

"The focus right now is to wait for the bund shakeout to finish," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. "Going into the year, everyone was long the dollar and bunds, and short the euro, and when people started taking some of those positions off, it really snowballed."

Some concerns that Greece may default on its debt in the near-term eased on Monday, reducing demand for safe haven U.S. Treasurys, after Greece paid about 750 million euros to the International Monetary Fund on Monday, a day before it was due.