2-Year T-Note Futures Market News and Commentary
Sep 10-year T-notes on Wednesday moved lower the entire day and closed down -17 ticks and the 10-year T-note yield rose +6.3 bp to 2.048%. T-note prices fell back Wednesday after trade optimism boosted stocks and reduced safe-haven demand for T-notes. U.S. Treasury Secretary Mnuchin told CNBC in an interview Wednesday morning that negotiators were "about 90% of the way" to a trade deal with China before talks broke down and that he was "hopeful" that a trade deal between the U.S. and China can be found. Also, a report said the U.S. is willing to suspend the next round of tariffs on an additional $300 billion of Chinese imports while the U.S. and China prepare to resume trade negotiations. T-notes maintained their losses after Wednesday's data showed May core capital goods orders, a proxy for capital spending, rose +0.4%, stronger than expectations of +0.1%. Finally, supply pressures weighed on T-note prices as the Treasury continued this week's $131 billion T-note package by selling $41 billion of 5-year T-notes and $18 billion of 2-year floating-rate notes on Wednesday. T-notes still have underlying support from simmering U.S./Iran tensions and last week's dovish turn by the Fed and market expectations for nearly three rate cuts in 2019. The market is discounting the odds at 100% for a 25 bp rate cut at the next FOMC meeting on July 30-31. Inflation expectations increased Wednesday as the 10-year T-note breakeven inflation expectations rate rose by +2.4 bp to 1.715%, moderately above last Monday's 2-3/4 year low of 1.612%.