Gold drifts higher as Middle East tension attracts safe-haven inflows

Jan 18 – Gold prices firmed on Thursday, aided by safe-haven demand amid the Middle East conflict, while investors looked out for further clarity on the US Federal Reserve’s future interest rate path.

Spot gold rose 0.7% to USD 2,019.12 per ounce by 02:06 p.m. ET (1906 GMT) after hitting a five-week low in the previous session.

US gold futures settled 0.8% higher at USD 2021.6.

Geopolitical tensions are unintentionally coordinating efforts to keep gold in the USD 2,000 range as there is so much uncertainty, said Daniel Pavilonis, senior market strategist at RJO Futures.

The US on Wednesday put the Yemen-based Houthi rebels back on its list of terrorist groups, as the militants attacked their second US-operated vessel in the Red Sea region this week.

Atlanta Federal Reserve President Raphael Bostic said on Thursday that he was open to reducing US interest rates sooner if there is “convincing” evidence in coming months that inflation is falling faster than he expected.

Traders are pricing in a 57% chance of a March rate cut, according to CME’s Fed Watch tool.

Gold investors are analysing how much of a negative impact delayed interest rate cuts might have on prices, though a bunch of US data misses could help gold’s cause, said Fawad Razaqzada, market analyst at City Index, in a note.

Data showed jobless claims fell last week to the lowest level since late 2022, suggesting job growth likely remained solid in January.

Spot silver was up 0.9% at USD 22.74 per ounce.

“We forecast a 2024 price of USD 24.33/oz; ETF (exchange traded funds) demand may recover from liquidation; we anticipate deficits to buoy prices,” HSBC said in its 2024 outlook.

Platinum climbed 2.4% to USD 904.74, and palladium gained 2.7% to USD 940.28.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Tasim Zahid, Shailesh Kuber, and Shweta Agarwal)

Oil prices settle higher global demand forecasts, US crude stock draw

Jan 18 – Oil prices settled higher on Thursday after the International Energy Agency (IEA) joined producer group OPEC in forecasting strong growth in global oil demand and as cold winter weather disrupted US crude output while the government reported a big weekly draw in crude inventories.

Oil traders also worried about geopolitical risks in the Middle East. Pakistan conducted strikes inside Iran, targeting Baluchi separatist militants, the country’s foreign ministry said, two days after Iranian strikes inside Pakistani territory.

Brent crude futures settled up USD 1.22, or 1.6%, to USD 79.10 a barrel, while US West Texas Intermediate crude futures settled up USD 1.52, or 2%, USD 74.08.

The US Energy Information Administration reported a larger-than-expected draw in crude inventories of 2.5 million barrels in the week ended Jan. 12.

“The fear of another large build of total inventories has not materialized, modestly supporting prices,” said Giovanni Staunovo, analyst at UBS.

The IEA monthly report said it expects oil demand to grow by 1.24 million barrels per day (bpd) in 2024, up 180,000 bpd from its previous projection.

On Wednesday, the Organization of the Petroleum Producing Countries (OPEC) said it expected demand growth of 2.25 million bpd this year, unchanged from its forecast in December. The producer group also said oil demand is expected to rise by a robust 1.85 million bpd in 2025 to 106.21 million bpd.

The IEA’s executive director, Fatih Birol, told the Reuters Global Markets Forum he expects oil markets to be “comfortable and balanced” this year despite Middle East tensions, rising supply and slowing demand growth.

In the United States, about 40% of oil output in North Dakota’s oil output remained shut-in due to extreme cold weather and operational challenges, the top oil-producing state’s pipeline authority said on Wednesday.

Last week, the United States produced another record of 13.3 million barrels per day of crude oil, the EIA data showed.

Oil’s range-bound trading in recent days reinforces the narrative that investors are shrugging off concern that tankers may be at risk from attacks in the Red Sea, said Ehsan Khoman, analyst at bank MUFG.

Oil tankers that had diverted away from the Red Sea have turned back and passed through the Bab al-Mandab Strait, ship-tracking data shows, though tensions in the region continued to disrupt global shipping and trade.

“The turmoil in the Mideast has kicked up freight and insurance rates appreciably but (has) not yet affected total global oil supply other than delaying shipments toward Europe and other regions,” said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

Attacks by Yemen-based Houthi militants against ships in the Red Sea have forced many companies to divert cargoes around Africa, adding to journey times and costs. The United States on Wednesday conducted another round of strikes against Houthi targets in Yemen in retaliation for the attacks on shipping.

The Iran-aligned Houthis have said they are acting in solidarity with Palestinians during Israel’s Gaza war.

(Reporting by Laura Sanicola, Additional reporting by Ahmad Ghaddar in London and Jeslyn Lerh in Singapore; Editing by David Goodman, Will Dunham, and David Gregorio)

Weak data, limited stimulus keep investors away from China

SINGAPORE, Jan 17 – China’s patchy economic growth and a renewed slump in home sales have redoubled investors’ resolve to steer clear of the country’s markets, sending shares tumbling as foreigners quit in the absence of fresh policy support.

Gross domestic product growth was 5.2% for 2023, hitting Beijing’s target and market expectations. But December data also published on Wednesday showed the fastest fall in home prices for nine years, an 8.5% annual slide in sales by floor area and a collapse in housing starts.

Global money managers — who have been sellers of Chinese stocks as the post-pandemic recovery has sputtered — say it will take a long time or a lot of stimulus to repair a sector once accounting for a quarter of the economy, and change their minds.

Foreigners have already sold a net 12.4 billion yuan (USD 1.7 billion) of Chinese shares this year via the trading link with Hong Kong and more followed on Wednesday with China’s blue-chip index down more than 2% to a five-year low.

Hong Kong’s Hang Seng slid toward its largest single-day loss in 15 months after the China data, dropping 4% to its lowest in more than a year.

The price-to-earnings ratio of the index, a widely-used valuation measure, is a paltry 7 and its lowest in at least a decade, compared with 22.2 for the S&P 500.

“Today’s data follows a consistent trend in the recent few months,” said Ken Peng, head of investment strategy in Asia at Citi Global Wealth, at an outlook briefing in Singapore.

Retail sales missed market forecasts and fixed-asset investment topped them, he said, but government efforts at supporting innovation and manufacturing are not yet enough to offset the drag from a deepening slide in real estate.

“The Beijing government seems to think that the market and economy have not gotten to a point that’s bad enough to warrant a kitchen-sink policy response,” Peng said. “It’s the timing and policy response uncertainty that bothers a lot of investors.”

NARRATIVE TRAP

Performance has also been dismal, with mainland shares lagging global stocks for three years, and surging markets in India, the US and Japan offer reason to leave.

Intense focus has fallen on some sort of demand stimulus – however unlikely – as the trigger to draw investors back.

Sid Mathur, head of Asia macro strategy and emerging market research at BNP Paribas, calls it a “narrative trap” that’s grown after Chinese policymakers doled out large and targeted fiscal stimulus during downturns in the past few decades.

It’s different now, he says, with the stimulus of a lower magnitude and aimed “much more to contain downside risks to long-term growth than to maximize short-term growth”.

Economists have noted, too, that infrastructure spending and targeted support for green or high-tech manufacturers fail to confront the confidence crisis that’s been unleashed by the collapse in home prices.

“It’s true Chinese authorities have rolled out stimulus measures to prop up the economy, but the effects have hardly played out … because the same old infrastructure spending has been overdone in the past two decades,” said Toru Nishihama, chief economist at Dai-Ichi Life Research Institute in Tokyo.

To be sure, the depth of negativity around China suggests some kind of bounce is due and technical indicators show stock markets in over-sold territory. China’s bond market has also been rallying and drawing foreign investment.

But sentiment is so fragile that sustained recovery or the return of long-term, long-only investors seems distant.

“Pessimism in China is all but entrenched now,” Bank of America analysts noted in a survey of 256 Asia fund managers published on Tuesday, with almost 70% of respondents either in wait-and-see mode or looking elsewhere.

(USD 1 = 7.1965 Chinese yuan)

(Additional reporting by Tetsushi Kajimoto in Tokyo and Vidya Ranganathan in Singapore; Editing by Kim Coghill)

Nominal China GDP? Not pretty

Jan 18 – Asian markets look set for another torrid session on Thursday, with investors still reeling from the China-fueled weakness and strong rise in global bond yields the previous day.

Highlights on the regional economic calendar will likely be Japanese machinery orders, New Zealand manufacturing PMI, Australian unemployment, and possibly the latest snapshot of Chinese foreign direct investment.

Of all those indicators, China’s FDI would be the most significant, especially in light of the ‘data dump’ from Beijing on Wednesday and the distinctly lukewarm reaction in Chinese asset markets that followed.

The economic numbers for December were mixed – industrial production was a beat, retail sales a miss – and the official GDP figures showed that the economy grew 5.2% last year.

But that’s ‘real’ growth. Strip out deflation, and nominal growth was just 4.2%, according to Deutsche Bank’s Jim Reid. Excluding the pandemic-hit growth of 2.7% in 2020, it is the lowest annual number since 1976, the year of Chairman Mao Zedong’s death.

As Reid notes, nominal GDP is important to debt ratios, property markets, and earnings. “So this would help explain the continued weakness in Chinese equities and property markets.”

China’s CSI 300 index slumped more than 2% on Wednesday, its biggest fall since August. Markets across the region also fell – the MSCI Asia Pacific ex-Japan index had its worst day in six months and is now down almost 4% over the last two days, its biggest two-day slump since October 2022.

China bulls seeking solace in the long-term outlook would not have welcomed the latest population figures from Beijing on Wednesday either. The birth rate fell to a record low last year and the population dropped by 2.08 million to 1.409 billion.

This was the second annual decline, following the 850,000 in 2022, the first since 1961 during the Great Famine of the Mao Zedong era. A falling population is a headwind to long-term potential growth.

More broadly, global markets this week are on the defensive, pounded by the sharp rise in bond yields as traders rein in some of the extreme dovishness priced into the 2024 interest rate outlook.

Whether driven by surprisingly strong economic activity, as is the case in the US, or surprisingly high inflation, as shown in Canada and Britain, bond yields are rising and rate cut expectations are ebbing.

Emerging market stocks are having their worst start to a calendar year since 2016, and the yawning performance gap between emerging Asia and the rest of the world in recent years appears to be only widening.

Even the bulled-up Nikkei is feeling the strain. It fell on Wednesday for a second day, although it was probably only a matter of time before a wave of profit-taking crashed in.

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

– Japan machinery orders (November)

– Australia unemployment (December)

– China FDI (December)

(By Jamie McGeever)

US yields rise as economic data dents rate cut expectations

NEW YORK, Jan 17 – US Treasury yields climbed on Wednesday after an unexpected rise in UK inflation last month and stronger-than-expected US December retail sales data strengthened the case that interest rate cuts will not be as imminent as the market expects.

The UK inflation print, as well as more push-back from European Central Bank officials on Wednesday against interest rate cut bets, pushed European bond yields higher.

Treasury yields, which move inversely to prices, followed suit, with the uptick gaining momentum after Commerce Department data showing retail sales in December grew by 0.6% month on month, above the 0.4% economists had expected in a Reuters poll.

Weak demand for a 20-year bond auction also helped lift yields later on Wednesday.

“December retail sales reflect an economy that, although slowing, continues to be underpinned by consumer spending,” said Quincy Krosby, chief global strategist for LPL Financial.

“For the Federal Reserve, slower consumer demand would help propel inflation to decelerate at a faster pace; however, with consumer confidence gaining momentum, the economic landscape remains on solid ground,” she said in a note.

The short-end of the yield curve, more closely linked to monetary policy expectations, led the move higher.

Two-year yields rose about 13 basis points to 4.354%, their biggest daily increase in over a month. Benchmark 10-year yields added about four basis points to 4.104%, their highest since Dec. 13.

In the short-term rate futures market, traders dialed back expectations of a Federal Reserve interest rate cut in March, which on Wednesday was seen as having a nearly 54% probability, against 63% a day earlier, according to CME Group data.

“We are seeing relatively strong short-term US data which is convincing people to push back on Fed pricing,” said Brij Khurana, fixed-income portfolio manager at Wellington Management. “I do think there’s too much priced into the front-end of the yield curve in terms of cuts,” he said.

On the economic front, a Fed survey on Wednesday showed US economic activity saw little or no change from December through early January, with firms reporting pricing pressures were mixed and citing signs of a cooling labor market.

Separately, the Treasury saw soft demand for a USD 13 billion auction of 20-year bonds, a gauge of investors’ appetite for long-term government debt securities ahead of an expected flood of debt issuance this year.

The paper was sold at a high yield of 4.423%, about nine basis points above where it was trading before the sale, a sign that buyers demanded a premium to absorb the issuance. The bid-to-cover ratio, a measure of demand, was 2.53 – the lowest since March last year. The Treasury will sell USD 18 billion of 10-year Treasury Inflation-Protected Securities (TIPS) on Thursday.

The curve comparing two-year and 10-year Treasury yields flattened to about minus 25 basis points on Wednesday because of the sharp yield rise in two-year paper, after steepening to about minus 16 basis points on Tuesday – the least inverted it had been since early November.

The inversion of the 2/10 yield curve is closely watched by investors as it has generally preceded recessions.

(Reporting by Davide Barbuscia; Editing by Christina Fincher and Andrea Ricci)

Gold retreats to over one-month low after data dims rate-cut hopes

Jan 17 – Gold prices fell to a more than one-month low on Wednesday as strong economic data strengthened dollar and Treasury yields and lowered market expectations of a US rate cut in March.

Spot gold was down 1.2% at USD 2,003.89 per ounce as of 01:55 p.m. ET (1855 GMT), lowest since Dec.13. It fell 1.3% in the previous session in its biggest single-day decline since Dec. 4, 2023.

US gold futures settled 1.2% lower at USD 2006.5.

US retail sales increased more than expected in December, keeping the economy on solid ground heading into the new year.

The US dollar hovered at a one-month high following robust retail sales data. While yields on the benchmark US 10-year Treasury notes also gained.

“The markets are having doubts about interest rate cuts if the Fed can cut sooner than later, which is pressuring gold prices. With the dollar being strong and cuts taking time, it is hard for gold to hold a rally,” said Bob Haberkorn, senior market strategist at RJO Futures.

“However, geopolitical risk will keep providing a base to prices and hold them around USD 2,000.”

Fed Governor Christopher Waller’s on Tuesday said that the central bank should not rush to cut rates until lower inflation can be sustained.

Traders are now pricing in around a 53% chance of a rate cut in March, according to the CME FedWatch tool.

There are encouraging signs in commercial demand for silver, which may attract investors, Bank of America said in a note dated Tuesday, reinforcing its constructive view on the metal for 2024.

Spot silver fell 1.7% to USD 22.52 per ounce, and platinum declined 1.3% to USD 883.02.

Palladium slipped 2.1% to USD 916.82, marking its lowest level since 2018.

The rate at which platinum is displacing palladium in the production of autocatalysts is slowing due to the sister metals approaching price parity, analysts said.

(Reporting by Anushree Mukherjee and Ashitha Shivaprasad in Bengaluru; Editing by Tasim Zahid and Shweta Agarwal)

Oil near flat as extreme cold’s hit to US output offsets China data

NEW YORK, Jan 17 – Oil prices were near flat on Wednesday as severe cold that disrupted some US oil production offset disappointing economic growth in China that stoked worries about energy demand.

Brent crude futures settled down 41 cents to USD 77.88 a barrel. US West Texas Intermediate crude futures (WTI) gained 16 cents at USD 72.56.

In North Dakota, a top oil-producing US state, below-zero degrees Fahrenheit temperatures caused oil output there to fall by 650,000 to 700,000 barrels per day (bpd), more than half its typical output, the state said.

Those supply concerns caused US crude futures to pare losses late in the session, after earlier falling by over USD 1 a barrel, said Andrew Lipow, president of Lipow Oil Associates.

US domestic crude stockpiles rose last week by 480,000 barrels, according to market sources citing American Petroleum Institute figures on Wednesday.

US government data on inventories is due Thursday.

Weakening prices on Wednesday, China’s economy in the fourth quarter expanded by 5.2% year on year, missing analysts expectations and calling into question forecasts that Chinese demand will fuel 2024 global oil growth.

The economic data “doesn’t end the headwinds over crude oil demand, the Chinese outlook for 2024 and 2025 is still bleak,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

“(The) oil industry was backing the notion that, despite a bumpy recovery, oil demand from China has been resilient and will likely reach record levels in 2024.”

Still, China’s oil refinery throughput in 2023 rose 9.3% to a record high, indicating elevated demand even if it lagged some analysts’ expectations.

Other signs of steady Chinese demand have also appeared.

Investors kept an eye on naval and air conflicts in the Red Sea, which so far has not supported oil prices despite mounting concern about tankers having to pause or reroute, raising shipping costs and slowing deliveries.

Tensions remained high after the US mounted fresh strikes against Iran-aligned Houthi militants in Yemen on Tuesday after a Houthi missile hit a Greek vessel.

The International Energy Agency (IEA) expects oil markets to be in a “comfortable and balanced position” this year, despite Middle East tensions amid a rising supply and slowing demand growth outlook, its executive director Fatih Birol told the Reuters Global Markets Forum.

An optimistic OPEC stuck to its forecast for relatively strong growth in global oil demand in 2024. OPEC said that 2025 will bring a “robust” increase in oil use, led by China and the Middle East.

The US dollar hovered near a one-month high after comments from Federal Reserve officials lowered expectations for aggressive interest rate cuts. A stronger greenback reduces demand for dollar-denominated oil from buyers using other currencies.

(Reporting by Stephanie Kelly in New York, Paul Carsten in London, Muyu Xu in Singapore and Colleen Howe in Beijing; Editing by Marguerita Choy, David Gregorio, and Nick Zieminski)

Countdown to China GDP

Jan 17 – A raft of top-tier Chinese economic indicators for December, culminating in Q4 and 2023 GDP, takes center stage in Asia on Wednesday, with global markets under heavy selling pressure from a sharp rise in the dollar and US bond yields.

The MSCI Asia Pacific ex-Japan equity index slumped 1.8% on Tuesday – its steepest fall in nearly six months – and Wall Street’s slide will help ensure that sentiment remains fragile on Wednesday.

Asian stocks ex-Japan are now down 5% this year, and emerging market stocks are off to their worst start to a year since 2016.

Global risk appetite was dented after Federal Reserve Governor Christopher Waller on Tuesday indicated interest rate cuts could come later and be implemented more slowly than markets have been positioning for.

This is likely to spill over into Asia on Wednesday, where the focus will be centered on the Chinese economic ‘data dump’. Indonesia’s central bank also announces its latest interest rate decision.

Reuters polls suggest annual investment and industrial production growth rates in China held steady in December from the previous month, while retail sales growth slowed. The latest house price and unemployment figures will also be released.

On the broader GDP level, quarterly growth is expected to have slowed to 1% in the October-December period from 1.3%, while the annual rate of growth rose to 5.3% from 4.9%, largely due to base effects.

Chinese Premier Li Qiang in Davos on Tuesday said GDP growth was probably around 5.2% last year. He also said China is open for business, notable comments in light of China recently posting the first quarterly deficit in foreign direct investment since records began in 1998.

At a private lunch in Davos on Tuesday Li and People’s Bank of China Governor Pan Gongsheng later met business and finance leaders, including JP Morgan CEO Jamie Dimon, Bank of America CEO Brian Moynihan, and Blackstone CEO Steve Schwarzman.

Beijing may be on a charm offensive, but it will need the data to pay ball if it is to have any chance of succeeding.

Full-year growth is expected to slow to 4.6% in 2024 from 5.2% last year, with risks probably tilted to the downside – the property crisis is rumbling on, consumer and business confidence is weak, local government debt is high and rising, and deflation looms large over the economy.

Bank Indonesia, meanwhile, is expected to keep its key interest rate unchanged at 6.00% on Wednesday. With inflation within BI’s 2023 target range of 2.0% to 4.0% for seven months and falling, markets are pricing in the first rate cut in the third quarter.

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

– China house prices, investment, retail sales, industrial production, unemployment (December)

– China GDP (Q4 and 2023)

– Indonesia interest rate decision

– Japan tankan services index (January)

(By Jamie McGeever)

Dollar rallies to one-month high as Fed cut outlook dims

NEW YORK, Jan 16 – The dollar jumped in a volatile session on Tuesday as investors dialed back expectations for a March rate cut from the US Federal Reserve, fueled in part by comments by Board Governor Christopher Waller.

Markets are pricing in a 66.9% chance of a rate cut of at least 25 basis points (bps) in March from the Fed, compared with an 81% view in the prior session according to CME’s FedWatch Tool.

The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up 0.73% at 103.38, after climbing as high as 103.42, its highest level since Dec. 13. The index was on track for its biggest one-day percentage gain since Jan. 2.

The dollar added to gains on the session after Waller said the US is “within striking distance” of the Federal Reserve’s 2% inflation goal, but that the central bank should not rush toward cuts in its benchmark interest rate until it is clear that lower inflation will be sustained.

“(Waller) said there’s no reason to move as quickly as they have in the past, cuts should be methodical and careful,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“Waller is important because he is a hawk, he is obviously confirming what we already know and everybody at the Fed recognizes – that we have reached a peak.”

Chandler also noted the dollar had essentially traded sideways for the last two weeks, with oversold and technical conditions at the end of last year now being alleviated.

Goldman Sachs said in a note that while they have not changed their view the Fed will deliver a series of three consecutive cuts beginning in March, Waller’s comments increased the risk the central bank could cut somewhat later or might prefer to cut once per quarter from the outset.

While the dollar was stronger throughout the session, the greenback briefly cut gains after a weak report on the manufacturing sector in the New York region.

The euro was down 0.72% at USD 1.0869 and poised for its steepest one-day percentage drop in two weeks as comments from European Central Bank policymaker Joachim Nagel on Monday attempted to curb expectations of early rate cuts.

Several policymakers from the ECB on Tuesday maintained a cloud of uncertainty over the timing of the moves, although interest rates are still likely to come down this year.

Also supporting the dollar was a climb in US bond yields on Tuesday after Monday’s holiday, with the 10-year up 11.9 basis points at 4.0695%,

An ECB survey on Tuesday showed consumer expectations of euro zone inflation three years ahead fell in a November poll to 2.2% from 2.5%.

Sterling was last down 0.79% at USD 1.262 after data showed British wage growth slowed sharply in the three months through November, supporting the idea that the Bank of England will cut rates heavily this year.

The dollar was 1.04% higher against the Japanese yen, at 147.26, after hitting 147.31, matching its highest level since Dec. 7. Data showed Japan’s wholesale price index stayed flat in December from a year ago, with the rate of change slowing for the 12th straight month, taking pressure off the Bank of Japan to back away from its monetary stimulus measures soon.

In cryptocurrencies, bitcoin rose 1.39% to USD 43,272. It has fallen about 6% since the Securities and Exchange Commission said it approved 11 applications for the first US-listed exchange traded funds (ETFs) to track bitcoin.

(Reporting by Chuck Mikolajczak in New York; Editing by Andrea Ricci and Matthew Lewis)

US yields rise as central banks push back on rate cuts

NEW YORK, Jan 16 – US Treasury yields rose on Tuesday, reversing the bullish tone at the end of last week after central bankers in Europe and the United States pushed back against market expectations of imminent interest rate cuts.

Yields, which move inversely to prices, were higher across the curve after weakness in European bonds on Monday spurred by European Central Bank officials pushing back on market bets on rate cuts. US markets were closed on Monday for a national holiday.

A report over the weekend showed Atlanta Fed President Raphael Bostic said inflation could “see-saw” if the central bank cuts rates too soon. Meanwhile, on Tuesday, Fed Governor Christopher Waller said the path of policy change must be carefully calibrated, not rushed.

Fed funds futures traders on Tuesday were pricing for over 150 basis points in rate cuts this year, but assigned a 60% chance of a rate cut in March after Waller’s speech, down from about 70% earlier.

The mismatch between market expectations and indications from the Federal Reserve, which has penciled in 75 basis points of cuts in 2024, is likely to continue to cause swings in yields, said Doug Huber, vice president for investment strategies at Wealth Enhancement Group.

“There’s the questions of when rates get cut and how many are there … to us that will set us up for an environment where we’re anticipating more volatility in rates,” he said.

While higher compared to their close last week, yields declined on Monday after the New York Federal Reserve’s Empire Manufacturing survey came much lower than expected.

Benchmark 10-year yields were last seen at 4.037%, up from a 3.95% close last week. Two-year yields, which more closely reflect monetary policy expectations, were at about 4.21%, up from 4.138% on Friday.

The curve comparing two and 10-year yields steepened to minus 17.8 basis points, the least inverted it has been since early November. That part of the Treasury yield curve, when inverted, is generally seen as a sign of an upcoming recession.

(Reporting by Davide Barbuscia; Editing by Nick Zieminski and Jonathan Oatis)

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