Dollar gains on rate outlook, yen weakens for third day

NEW YORK/LONDON – The dollar gained on Wednesday as investors bet on the US economy outperforming peers and was higher for the third day against the Japanese yen, keeping investors wary of the risk of intervention from Tokyo.

In Europe, the Swedish crown came under pressure after the central bank cut interest rates and said it expected two more cuts this year, while the pound was stuck in negative territory ahead of a Bank of England meeting on Thursday.

The move in Sweden was a reminder that the dollar is likely to remain strong as long as other central banks cut rates before the US Federal Reserve.

The yen remained front of mind for currency traders as Japanese officials issued a stronger warning over the impact of the weak currency on the economy.

“Carry trades are still attractive and the market is still more inclined to buy the dip in dollar/yen,” said Vassili Serebriakov, an FX strategist at UBS in New York.

“I don’t think the market is ignoring the risk of intervention, but … unless there’s a significant change in the US economic outlook we don’t think there will be a significant change in the setup for the FX markets either,” Serebriakov added.

Analysts have said any intervention from Tokyo would only offer temporary respite for the yen, given the wide gap between interest rates in the US and Japan.

Traders believe Japanese authorities spent some USD 60 billion last week on propping up the yen after it hit its weakest in 34 years against the dollar around 160 yen.

The dollar was last up 0.59% against the yen at 155.6, up from last week’s low of 151.86.

FED ABOVE ALL

Investors are focused on the pace and timing of Fed rate cuts. The latest data showing weaker-than-expected US jobs creation, together with an easing bias from the US central bank, have cemented expectations that rates will likely be lower by year-end.

The dollar was last up 0.11% at 105.54 against a basket of currencies, above last week’s one-month low. The euro dipped 0.08% to USD 1.0745. Sterling weakened 0.1% to USD 1.2492.

In the meantime, central banks in Europe have already started cutting interest rates. The Swiss National Bank cut in March ahead of Wednesday’s move by Sweden’s Riksbank.

The European Central Bank has signaled its intention to cut in June, assuming the data points in the right direction, and the BoE is gradually smoothing the way to its first cut.

“What we’re looking at is a raft of European central banks going over the next few months, whether or not it’s June, or August. We’ve got a near 50% chance of the Fed cutting in September, but I think that’s probably the one that could get pushed out,” XTB research director Kathleen Brooks said.

“For now, and particularly today, the focus is on Europe cutting first and we’re seeing that upward pressure on the dollar,” she said.

While traders are pricing in an expected Fed rate cut in September, that move will also depend on whether inflation continues to ease back closer to the US central bank’s 2% target.

“It’s going to be hard to go more dovish from here in terms of Fed expectations I think in the near term and that’s why that bias to buy the dollar is still going to be in place,” said UBS’ Serebriakov.

Boston Fed President Susan Collins said on Monday that the current setting of monetary policy would slow the economy in the way she believed would be necessary to get inflation back to the target.

In cryptocurrencies, bitcoin fell 0.77% to USD 62,480, set for a fourth daily loss, its longest stretch of daily declines so far this year.

(Reporting by Karen Brettell; Additional reporting by Amanda Cooper; Editing by Chizu Nomiyama, Toby Chopra, and Alison Williams)

Markets subdued, China trade to rebound

Asian markets are set for a sluggish open on Thursday, with mixed US corporate earnings, a firm dollar, and an upward drift in US bond yields dampening investors’ appetite for risky assets.

The Japanese yen is back in the spotlight, its latest bout of weakness prompting warnings from Tokyo on Wednesday that, so far at least, seem to have gone unheeded. The dollar is on the front foot and gunning for 156.00 yen.

There are a few potential market-moving economic indicators and events on Thursday for investors to get their teeth into, including Chinese trade data, a monetary policy decision from Malaysia, and first-quarter GDP figures from the Philippines.

Asian markets won’t get much steer from Wall Street, which ended mixed on Wednesday. One source of relief may be oil – Brent crude printed a two-month low below USD 82 a barrel, and although inflation worries are running high, oil is down around 10% in recent weeks.

Japan’s financial heavy hitters were out on Wednesday warning that the yen’s weakness could trigger action from policymakers.

Bank of Japan Governor Kazuo Ueda said the central bank could raise rates again, and Finance Minister Shunichi Suzuki voiced “strong concern” over the negative impact of a weak yen and repeated Tokyo’s readiness to intervene in the FX market.

The warnings have had no effect and the dollar was changing hands at 155.50 yen late on Wednesday, up on the day and back to where it was at the BOJ’s April 26 policy announcement. It is now only two yen away from where it was when Japan carried out its second suspected round of intervention on May 1.

On the data front, figures from Beijing are expected to show Chinese imports and exports swung to year-on-year growth in April. But export growth is expected to be modest as factory owners wrestle with weak overseas demand and overcapacity.

Trade relations between China and the West remain fraught, with the latest twist coming from US tech giant Intel saying its sales would take a hit after the US revoked some of the chipmaker’s export licenses for a customer in China.

Bank Negara Malaysia will leave its key interest rate at 3.00% for as sixth consecutive meeting and keep it there at least until 2026, despite a weakening currency and a steady inflation outlook, according to a Reuters poll of economists.

Figures from Manila, meanwhile, are expected to show that the Philippines’ economy expanded at an annual rate of 5.9% in the first quarter, but quarter-on-quarter growth is expected to halve to 1.0% from 2.1% in the October-December period.

The Japanese earnings season rolls on, with major companies including Nissan, Nippon Steel, Panasonic, and Softbank reporting full-year 2024 results on Thursday.

Here are key developments that could provide more direction to markets on Thursday:

– China trade (April)

– Malaysia interest rate decision

– Philippines GDP (Q1)

(Reporting and Writing by Jamie McGeever; Editing by Josie Kao)

Oil settles lower on signs of easing supply tightness

NEW YORK – Oil prices closed slightly lower on Tuesday on signs of easing supply concerns, while market participants shifted their focus to US stockpiles data due later today and Wednesday.

Brent crude futures settled 17 cents lower at USD 83.16 a barrel, and US West Texas Intermediate crude futures closed 10 cents lower at USD 78.38.

Prices fell further in thin post-settlement trading after market sources said that data from the American Petroleum Institute showed a jump in US crude and fuel stocks last week. Rising inventories, typically a sign of weak demand, have defied analysts’ expectations in recent weeks.

Analysts polled by Reuters forecast a decrease in US oil and fuel stockpiles, and official data from the US Energy Information Administration (EIA) is due at 10:30 a.m. ET (1430 GMT) on Wednesday.

Brent crude futures traded at USD 82.98 a barrel by 4:48 p.m. ET, 35 cents lower than Monday’s closing price, and WTI futures were down 23 cents to USD 78.26 a barrel. US gasoline futures RBc1 and ultra-low sulfur diesel futures HOc1 also fell in extended trading.

“If EIA shows less barrels are going into the refineries, then that is a problem for crude oil here,” Mizuho analyst Robert Yawger said. “Heading into peak summer driving season we should be drawing, not building,” he added.

Current global inventory data shows crude oil and petroleum supplies are running 1.1 million barrel per day above forecasts in developed economies, according to an analysis by energy brokerage StoneX.

“Global inventories remain in a building phase and has accelerated recently,” StoneX analyst Alex Hodes wrote to clients on Tuesday.

The EIA on Tuesday raised its forecasts for this year’s world oil and liquid fuels output and lowered its demand expectations, pointing to a well-supplied market as opposed to prior forecasts that showed under-supply.

The premium of the first-month Brent contract to the six-month contract slipped to USD 2.90 a barrel on Tuesday, the lowest since mid-February, another sign of market participants betting on easing supply tightness.

Last week, Brent and WTI had their steepest weekly losses in three months as weak US jobs data fueled hopes for interest rate cuts.

Oil prices found some support in Tuesday’s session from a US government solicitation to buy more than 3 million barrels of oil for the Strategic Petroleum Reserve (SPR).

Oil traders largely looked past escalating tensions in the Middle East, where the Israeli military seized control of the Rafah border crossing between the Gaza Strip and Egypt and its tanks pushed into the southern Gazan town of Rafah, as mediators struggled to secure a ceasefire agreement.

“Instead, their focus appears directed towards the uncertainties surrounding global economic growth prospects and the anticipated impact of sluggish growth on oil demand,” said Ricardo Evangelista, senior analyst at financial brokerage ActivTrades.

(Reporting by Shariq Khan; Additional reporting by Alex Lawler, Deep Vakil, Andrew Hayley and Jeslyn Lerh; Editing by Sharon Singleton, David Gregorio and Lisa Shumaker)

Japan warns of action over rapid currency moves

TOKYO – Japan may have to take action against any disorderly, speculative-driven foreign exchange moves, the government’s top currency diplomat Masato Kanda said on Tuesday, reinforcing Tokyo’s readiness to intervene again to support a fragile yen.

In a sign of authorities’ alarm over recent yen falls, Bank of Japan Governor Kazuo Ueda said currency moves were among topics he discussed in a meeting with Prime Minister Fumio Kishida on Tuesday.

Kanda, Japan’s vice minister of finance for international affairs who also oversees the country’s currency policy, said the government did not need to intervene if exchange rates move steadily reflecting fundamentals.

“However, when there are excessive fluctuations or disorderly movements due to speculation, the market is not functioning and the government may have to take appropriate action. We will continue to take the same firm approach as we have in the past,” said Kanda.

Ueda also said the central bank will guide monetary policy with a close eye on how the yen’s falls could affect inflation, suggesting the currency’s moves could affect the pace and timing of future interest rate hikes.

“I mentioned that in general, currency moves could have a potentially major impact on the economy and prices, and that the BOJ will therefore scrutinize the yen’s recent falls in guiding policy,” Ueda told reporters after meeting Premier Kishida.

While a boon for Japanese exporters, the weak yen has become a source of headaches for policymakers as it increases import costs, adds to inflationary pressures, and squeezes households.

Tokyo is suspected to have intervened on at least two separate days last week to support the yen after it tumbled to lows last seen more than three decades ago.

BOJ data suggested authorities spent more than 9 trillion yen (USD 58.4 billion) in defense of the currency, helping lift the yen from a 34-year low of 160.245 per dollar to a roughly one-month high of 151.86 over the span of a week.

Tokyo is estimated to have spent around USD 60 billion during its last forays in the market to prop up the yen in September and October 2022.

The yen, which is down nearly 9% on the dollar this year, was last trading around 154.50.

YIELD PRESSURE

Japanese businesses have traditionally favored a weak yen given the country’s heavy reliance on exports. But they are now questioning whether the weak yen has become too much of a good thing.

“No matter what, the yen weaker than the 150 level (against the US dollar) is too much,” the chairman of the powerful Keidanren business lobby, Masakazu Tokura, told a regular press conference on Tuesday. If authorities had conducted intervention, the timing was “very good,” he added.

The yen’s relentless decline is putting the BOJ in a tight spot. The currency has been under pressure despite the BOJ’s landmark decision to ditch negative interest rates in March as US rates have climbed and Japan’s have stayed near zero.

That dynamic has driven cash out of the yen into higher-yielding assets, with the pressure intensifying in recent months as expectations for Federal Reserve rate cuts receded.

Ueda last month dropped hints the BOJ could raise rates in several stages in years ahead, with a hike possible in autumn. But the hawkish signals have been drowned out by markets focused on cues to sell the yen.

Hiking rates too hastily could also hurt Japan’s fragile economic recovery, a risk the governor had stressed even as the BOJ phased out its massive monetary support.

Many analysts expect the BOJ to raise interest rates from current levels around zero sometime this year, though they are divided on how quickly borrowing costs could rise thereafter.

(USD 1 = 154.1800 yen)

(Reporting by Satoshi Sugiyama and Leika Kihara; Additional reporting by Kentaro Sugiyama and Yoshifumi Takemoto; Editing by Stephen Coates, Shri Navaratnam, and Emelia Sithole-Matarise)

Ten-year yield hits 3-week low, while 3-year auction sees decent demand

NEW YORK – The yield on the benchmark 10-year Treasury note fell on Tuesday amid persistent hope that the Federal Reserve would lower rates this year, while other maturities were steady after a chunky sale of three-year notes saw decent demand without a rate concession.

The Treasury sold USD 58 billion of the notes at a high yield of 4.605%, about a basis point below where three-years were trading at the time, with a bid-to-cover ratio of 2.63, the highest since a three-year sale in January.

The three-year was just a first taste of supply in the pipeline this week. The Treasury will sell USD 42 billion in 10-years on Wednesday and USD 25 billion of 30-year bonds on Thursday.

Kim Rupert, managing director of fixed income at Action Economics in San Francisco said the auction went well and gave it a “B” grade.

“It’s a good start,” Rupert said. “It priced a little bit through where it was trading right into the auction, so the fact that yields were a little bit lower was a good sign and demand was a little bit better than average.”

The three-year note was last yielding 4.649%, up 0.6 bp from late Monday.

The yield on 10-year notes was 2.8 basis points lower from late Monday at 4.461%. It fell to 4.42%, the lowest since April 10, continuing a decline that accelerated after Friday’s release of a smaller-than-expected rise in April nonfarm payrolls.

The jobs report added juice to a Treasuries rally after the Federal Open Market Committee said the recent uptick in inflation and economic growth was unlikely to derail rate cuts this year. It all but ruled out rate hikes.

The 2-year note yield, which typically moves in step with interest rate expectations, was up 0.6 basis points at 4.8283%. On Friday it fell to 4.716%, the lowest since April 5.

“When the 2-year was over 5% and the 10-year was nearly at 4.70%, there was a good interest in the Treasury market. Now that we’re down 25-30 basis points there is less interest in it,” said Stan Shipley, fixed income strategist at Evercore ISI in New York.
“I don’t think the auctions we get this week are going to be nearly as robust as the last ones we had,” he said. “And from what we hear from clients they are not as enthusiastic about this either.”

The calendar of economic indicators is light this week. So the waiting game is on ahead of the April reads on producer prices next Tuesday and especially the widely watched CPI number next Wednesday, which will provide insight on whether inflation has begun to come down toward the Fed’s 2% target rate.

Meanwhile, numerous Fed officials are on record this week. On Tuesday, Federal Reserve Bank of Minneapolis President Neel Kashkari told the Milken Institute 2024 Global Conference that a rate cut this year is still a possibility, but also said if rates need to be held for an extended period, or raised, the Fed would do that.

The 30-year bond yield was down 3.8 basis points at 4.6044%, also hitting its lowest since April 10.

The yield-curve spread between yields on two- and 10-year Treasury notes, closely watched as an indicator of economic expectations, was at a negative 34.8 basis points, more inverted than -33.9 bp late on Monday.

In the fed funds futures market, traders are pricing in a 66% chance the Fed will pivot in September with a 25 basis point cut at that meeting, unchanged from Monday. The second cut is priced for December.

(Reporting by Alden Bentley, Editing by Nick Zieminski)

US dollar rises as yen weakness resumes

NEW YORK – The US dollar rose against most currencies on Tuesday, steadily gaining ground throughout the day as investors digested the latest comments from Federal Reserve officials about the possible path of interest rates.

Minneapolis Federal Reserve President Neel Kashkari said at a Milken Institute conference that stalled inflation, kept higher in part by housing market strength means the central bank will need to hold borrowing costs steady for an “extended period,” and possibly all year.

Kashkari did, however, also say it is still possible the Fed could cut if inflation being to cool again.

The comments came on the heels of remarks from Fed officials on Monday that seemed to lean toward indicating the central bank’s next move would be to lower interest rates.

“There isn’t any consistent trend here other than what we’ve seen and that does not point to lower rates as much as various people in the market certainly and maybe even some people in the Fed itself would like,” said Joseph Trevisani, senior analyst at FX Street in New York.

The dollar index gained 0.26% to 105.42, on track for its first consecutive daily gain in nearly a month, with the euro down 0.18% at USD 1.0749.

The greenback strengthened against the Japanese yen for a second straight session as expectations of large interest rate differentials continued, even after new warnings from Japanese officials about their willingness to prop up their currency.

Japan’s top currency diplomat Masato Kanda said the country may have to take action against any disorderly, speculative-driven foreign exchange moves, signaling the Bank of Japan remained ready to intervene in the market after two suspected interventions of possibly almost USD 60 billion last week.

“The big action last week and a little bit before was the BOJ, which has achieved some success, but there’s nothing really to go on right now, so things are just sort of sitting still,” said Trevisani.

Against the Japanese yen JPY=, the dollar strengthened 0.55% to 154.73 after tumbling more than 3% last week, its biggest weekly percentage drop since early December 2022.

Following last week’s Fed policy meeting and softer-than-expected US jobs report, market expectations for two rate cuts this year have increased, with expectations for a cut of at least 25 basis points in September currently at 64.5%, according to CME’s FedWatch Tool.

With a light economic calendar this week, highlighted by the consumer sentiment reading from the University of Michigan on Friday, a host of Fed officials are due to speak, including Fed Governors Lisa Cook and Michelle Bowman later in the week.

The Australian dollar fell against the greenback after the Reserve Bank of Australia kept rates steady and held back from taking a hawkish stance, although RBA Governor Michele Bullock cautioned inflation risks were on the upside, signaling policy was unlikely to be eased anytime soon.

The Australian dollar weakened 0.53% versus the greenback at USD 0.6589 after falling as low as 0.6587 on the day.

Sterling weakened 0.46% to USD 1.2503 ahead of the Bank of England’s policy announcement on Thursday, where interest rates are expected to be kept unchanged.

(Reporting by Chuck Mikolajczak; Editing by Mark Potter and Jonathan Oatis)

Bullish momentum fades, yen intervention risks rise

Asian markets reach the mid-point of the week still sailing in fairly calm waters, although signs that the recent decline in US bond yields and the dollar is losing steam could be about to suck the life out of the recent rally in risk assets too.

There is some evidence over the last 24 hours of this playing out – Hong Kong stocks finally posted a down day on Tuesday, and broad Asian and emerging market equity indexes essentially ended the day flat.

That may be nothing more than rational profit-taking and position-trimming. The Hang Seng had been on its longest daily winning streak since 2018, and earlier on Tuesday the MSCI Asia ex-Japan and Emerging Market indexes had hit new 15-month and two-year highs, respectively.

Japanese markets, meanwhile, are once again dancing to their own tune with the yen back on the slide after last week’s suspected intervention, which has helped lift the Nikkei to its highest since April 15 and close to the 39,000 point mark.

There doesn’t appear to be any obvious local catalyst on Wednesday to give markets much impetus one way or the other, with only unemployment and trade figures from the Philippines and trade data from Taiwan on the calendar.

The yen and Indonesian rupiah could get a steer from their respective central bank chiefs – Bank of Japan governor Kazuo Ueda speaks at a seminar hosted by Japan’s Yomiuri newspaper, and Bank Indonesia governor Perry Warjiyo addresses the current economic situation in a briefing with the press.

With the yen falling back toward 155.00 per dollar, Japan’s top currency diplomat Masato Kanda warned on Tuesday that Tokyo may have to take action against any disorderly, speculative-driven FX moves.

Meanwhile, investors got another reminder on Tuesday – as if they needed one – of frayed Sino-US relations when TikTok and its parent company ByteDance sued in US federal court seeking to block a law signed by President Biden that would force the divestiture of the popular short video app or ban it.

This comes the same day Chinese President Xi Jinping left France after a two-day trip during which he offered no major concessions on trade or foreign policy, even as President Emmanuel Macron pressed him on market access.

French and Chinese companies concluded some agreements on Monday ranging from energy, finance and transport, but most were agreements to cooperate or renewed commitments to work together. Nothing significant enough to suggest icy trade tensions between China and the West are about to thaw.

On the corporate front, Japanese automaker Toyota releases full-year 2024 earnings. Analysts are expecting record-breaking results from the world’s top-selling automaker, lifted by demand for hybrids.

Other big firms reporting include Mitsubishi and Yamaha.

Here are key developments that could provide more direction to markets on Wednesday:

– Bank of Japan Governor Ueda speaks

– Taiwan trade (April)

– Toyota earnings (FY 2024)

(Reporting and Writing by Jamie McGeever; Editing by Josie Kao)

EUR/USD firm on soft US and better euro zone data, yen weak

The dollar index was little changed on Monday as broader weakness following Friday’s far-below forecast US jobs and ISM services reports was offset by a slide in yen after last week’s USD/JPY 160.245-151.86 plunge attracted dip buyers near 2023 and 2022’s peaks.

Monday’s comments from Federal Reserve Bank of New York President John Williams and Richmond Fed President Thomas Barkin had little impact on markets.

EUR/USD rose 0.1%, aided slightly by the final eurozone PMI composite business activity index growing at its fastest in nearly a year led by the service sector and despite weakness in the manufacturing sector. Also supportive of the euro was less negative investor sentiment.

Friday’s EUR/USD high at 1.08125 on EBS ran into the downtrend line from March’s swing highs, just above the 200-day moving average. The 100-DMA and twisting cloud by 1.0840 and the downtrend line from December at 1.0848 on Tuesday are nearby hurdles as well.

As with most dollar pairs, a better read on the likelihood of Fed rate cuts will come from US CPI and retail sales releases on May 15. If they are dovish enough to suggest the view that the top in Treasury yields was made last month and the Fed can consider more than the roughly two 2024 rate cuts currently priced in, EUR/USD could rise to key resistance at 1.1000.

USD/JPY rose 0.6%, continuing its rebound from Friday’s 151.86 low by its 2023/22 peaks, the April breakout above which reached 160.245 by last Monday before suspected interventions erased the entire breakout.

Friday’s disappointing US data and a further pullback in Treasury yields were not enough to keep active traders from buying the dip back to the big breakout point. But gains have been guarded so far by a 154.01 high because of the potential risk of intervention and that the May 15 US data might also leaning dovish.

Sterling rose 0.16%, but like EUR/USD, it was unable to reach Friday’s post-payroll miss peak before trimming gains. The BoE is seen holding steady at Thursday’s meeting, with a first rate cut not being priced in until August, and 47bp of cuts by year-end. The Fed isn’t favored to cut rates until September, with 44bp by year-end.

Aussie rose 0.28% ahead of Tuesday’s RBA meeting, which is seen steady, but with a hawkish bias.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold gains on soft dollar, rate cut hopes

Gold prices climbed more than 1% on Monday, as the US dollar weakened after softer-than-expected US jobs data fueled expectations of potential interest rate cuts by the Federal Reserve later this year.

Spot gold rose 1% to USD 2,324.94 per ounce by 2:00 p.m. ET (1800 GMT). US gold futures for June delivery settled 0.9% higher at USD 2,331.2 per ounce.

“The downside that we’ve seen over the last few weeks might actually be running out of steam, opening (the) door for gold prices to resume their upward trajectory,” said Daniel Ghali, commodity strategist at TD Securities.

Bullion lost about 1.5% last week.

Data on Friday showed job growth in the US slowed more than expected in April, while the increase in annual wages fell below 4.0% for the first time in nearly three years.

While gold is traditionally considered a hedge against inflation, lower interest rates reduce the opportunity cost of holding bullion and weigh on the dollar, in which gold is priced.

The US dollar was a touch lower on Monday, after hovering near its lowest level in about a month on Friday, following the employment report.

“We continue to expect two rate cuts this year, in July and November,” Goldman Sachs wrote in a note. The April employment report was soft but not weak, it said.

Chances of rate cuts in September were about 66% on Monday, as per CME’s FedWatch Tool.

Gold also found support from ongoing tensions in the Middle East, with Israel’s military operation in Rafah adding a layer of uncertainty to the market.

Other precious metals also advanced, with spot silver rising 3.3% to USD 27.40 per ounce, and palladium adding 3.6% to USD 979.83.

Platinum was steady at USD 955.35 per ounce.

(Reporting by Rahul Paswan in Bengaluru; Editing by Shilpi Majumdar and Alan Barona)

Yields move sideways as investors prepare for supply deluge

NEW YORK – US Treasury yields were mixed in quiet trade on Monday as investors digested Friday’s data showing moderating job creation last month, which validated the Federal Reserve’s suggestion that the economy was not so overheated that it held off cutting interest rates this year.

This week’s calendar looks much lighter than last week’s, which included the Treasury’s refunding plans, the Fed’s policy announcement keeping interest rates on hold, and Friday’s report of a smallish 175,000-job April nonfarm payroll rise that sent the yield on the two-year note skidding to a three-week low and the 10-year yield to a two-week low.

With the Consumer Price Index release more than a week away, attention will turn to Treasury auctions and how a parade of Fed speakers spin last week’s decision to hold rates steady while all but committing to ease in 2024, and almost ruling out a hike, even as the economy looks robust and inflation sticky.

The 2-year yield nudged up and the 10-year slipped in early afternoon trade after Richmond Fed President Thomas Barkin said getting inflation under control is a “stubborn road,” and the Fed will need to get demand down to finish the inflation fight.

Those comments came after New York Fed President John Williams told the Milken Global Conference that the Fed will eventually cut interest rates, which did not move the needle much either.

“I don’t think either Barkin or Williams said anything we haven’t heard before,” said Subadra Rajappa, head of US rates strategy and Societe Generale in New York. “I think for the most part the focus is going to be on how the market takes on the supply and how much of a concession we build.”

The yield on benchmark US 10-year notes was off 1.1 basis points from its late Friday level at 4.489%. It bottomed at 4.453% after Friday’s jobs report, the lowest yield since April 10.

The 2-year note yield, which typically moves in step with interest rate expectations, rose 2 basis points to 4.8264%. On Friday it fell to 4.716%, the lowest since April 5.

With last week’s fall in yields, it’s an open question how much demand will show up when the Treasury auctions USD 58 billion in 3-year notes on Tuesday, USD 42 billion in 10-years on Wednesday, and USD 25 billion of 30-year bonds on Thursday.

“The macro influences aren’t going to be quite as pronounced this week, but we’re back into supply,” said Jack McIntyre, portfolio manager, global bonds, at Brandywine Global. “Now the market is going to have to deal with this never-ending onslaught of Treasury supply.”

The April read on producer prices is due on May 14, followed by widely watched CPI for April on May 15. Both will be indicators of whether inflation has begun to come down again toward the Fed’s 2% target rate.

In the Fed funds futures market, traders are currently pricing in a 66% chance the Fed will pivot in September with a 25 basis point cut at that meeting. The second cut is priced for December.

The 30-year bond yield fell 1.8 basis points to 4.643% from 4.661%.

The yield-curve spread between yields on two- and 10-year Treasury notes US2US10=RR, seen as an indicator of economic expectations, was at a negative 33.9 basis points, more inverted than -32.35 late on Friday.

(Reporting by Alden Bentley; editing by Jonathan Oatis)

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