Treasury Bill Yields Soar With Debt Deal Elusive: Markets Wrap

   2023-05-23 07:05

(Bloomberg) — Treasuries dropped across the curve, with the two-year yield rising for an eighth day, after another round of debt-ceiling talks ended without a deal.

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Investors have been demanding higher premiums to hold US debt, especially those at the highest risk of default, with little time left for politicians to avert a catastrophic US default. Yields on four-week Treasury bills hovered at 5.47% on Tuesday, bringing their rise since the beginning of May to more than 60 basis points. US equity futures were little changed after a lackluster day on Wall Street.

Lowe’s Cos. slipped 1.5% in pre-market trading after cutting its sales outlook. In Europe, a rout in luxury-goods makers including Hermes International and LVMH dragged the Stoxx 600 lower, as Deutsche Bank AG analysts warned the sector is crowded and valuations are lofty.

President Joe Biden and House Speaker Kevin McCarthy called their discussions on Monday productive, but an agreement remains elusive. That left traders on tenterhooks with only a few days left before June 1, when Treasury Secretary Janet Yellen said her department may run out of cash. Any deal would have to be approved by Congress before then.

“I think a default is very unlikely as I don’t think either Democrats and Republicans want it, but we could get close to it and the deadline,” Fabiana Fedeli, chief investment officer for equities and multi-asset at M&G Plc, said on Bloomberg TV. “The closer we get to the deadline the more nervous clients will get.”

“You could have a move towards safer havens, perhaps the long end of yield curve,” she added.

Read more: US Default Scenarios Span From Localized Pain to Dimon’s ‘Panic’

In other markets, commodities were broadly lower, while the dollar and yen strengthened. Concern is growing about China’s tepid post-pandemic recovery, which is having a negative impact on iron ore and copper prices.

Tokyo’s Topix index fell for the first time in eight days, with semiconductor-related stocks turning lower on news that Japan’s tighter export controls will take effect July 23. Toyota Motor Corp. tumbled in the final minute of trading.

European markets were weaker after data showed manufacturing activity in the region shrank at the fastest pace since the pandemic three years ago. The euro lost 0.3%.

Among individual stock movers, Vivendi SE tumbled after billionaire Vincent Bollore sold shares of the media conglomerate, a sign that he’s isn’t planning a buyout. Swiss asset manager Julius Baer Group Ltd. sank after disappointing results.

Read more: Luxury Stocks Take $30 Billion Hit as LVMH, Hermes Lead Slump

Key events this week:

  • US new home sales, Tuesday

  • Dallas Fed President Lorie Logan speaks, Tuesday

  • Fed issues minutes of May 2-3 policy meeting, Wednesday

  • Bank of England Governor Andrew Bailey speaks, Wednesday

  • US initial jobless claims, GDP, Thursday

  • Interest rate decisions in Turkey, South Africa, Indonesia, South Korea, Thursday

  • Tokyo CPI, Friday

  • US consumer income, wholesale inventories, durable goods, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:


  • S&P 500 futures fell 0.2% as of 7:20 a.m. New York time

  • Nasdaq 100 futures fell 0.2%

  • Futures on the Dow Jones Industrial Average fell 0.2%

  • The Stoxx Europe 600 fell 0.3%

  • The MSCI World index fell 0.2%


  • The Bloomberg Dollar Spot Index rose 0.2%

  • The euro fell 0.3% to $1.0782

  • The British pound fell 0.4% to $1.2383

  • The Japanese yen was little changed at 138.47 per dollar


  • Bitcoin rose 1.5% to $27,311.4

  • Ether rose 2% to $1,855.13


  • The yield on 10-year Treasuries advanced three basis points to 3.75%

  • Germany’s 10-year yield advanced three basis points to 2.49%

  • Britain’s 10-year yield advanced eight basis points to 4.14%


  • West Texas Intermediate crude rose 0.8% to $72.67 a barrel

  • Gold futures fell 0.7% to $1,977.90 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott, Ishika Mookerjee and Allegra Catelli.

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