The ceasefire between Israel and Lebanon triggers a buying spree in US Treasuries, while employment data is ignored by the market.
- The US Treasury market held onto the buying interest built overnight as Israel and Lebanon agreed to a ceasefire. This news raised hopes for progress in the US-Iran peace agreement, with Trump hinting that a deal could be reached soon. Oil prices and yields both declined and remained at these levels.
- Data released on Thursday showed an increase in layoffs, with initial jobless claims unexpectedly rising to 225,000. First-quarter productivity growth was revised down to 0.3%, but the 1.8% rise in unit labor costs indicated no wage inflation pressure. Treasury market participants reacted mildly to these figures.
- Interest rate expectations shifted, with the probability of a 25 basis point rate hike in September falling from 26% to 22.0%, and the probability of a December hike dropping from 41.3% to 48%. Short covering by commodity trading advisors dominated trading activity, and hedge funds moderately bought after the data release.
- At the front end of the curve, there was buying from bank proprietary desks, while longer-duration cash and futures saw mortgage-related selling. In addition, six new investment-grade bond issues led to rate-hedging related paying/selling, but overseas spec accounts and real money accounts absorbed and adjusted positions against these sell orders ahead of Friday's employment report.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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