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(Bloomberg) — Treasuries are poised to snap a three-day run of gains as a surge in oil prices brings price-growth concerns to the fore ahead of this week’s eagerly anticipated US inflation numbers.
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Yields on US 10-year notes rose four basis points to 3.99%, while those on two-year securities, which are among the most sensitive to changes in monetary policy, increased two basis points. Brent crude jumped more than 5% — the most in four months — after the US announced sanctions on Russia’s biggest oil producers in an effort to end the war in Ukraine.
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US breakevens — which measure inflation expectations — have picked up since reaching a four-month low on Monday, coinciding with the rally in oil. Inflation is expected to average 2.31% over the next 10 years, the highest in a week.
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Money markets almost fully price the Federal Reserve to deliver two quarter-point cuts by year-end and three more by the end of 2026, according to swaps tied to policy-meeting dates.
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What Bloomberg Strategists say…
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“Treasuries generally face downside pressure when oil prices gain given the inflationary impulse from higher energy costs. But this latest bounce in crude could have an even larger impact as investors are having to make decisions without a regular flow of economic data. …That will mean other drivers — such as energy prices — will have a larger weighting in terms of importance in those decisions.”
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— Conor Cooper, Macro Squawk. Click here to read the full analysis.
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US inflation on Friday, which will offer the first real glimpse on the state of the economy following a long delay due to a US government shutdown, is forecast to have risen 0.4% in September, according to a Bloomberg survey of economists. The core figure, which strips out more volatile components, is expected to increase 0.3%.
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English (US)