Wednesday 13, September 2017 by William Mullally

US government bonds weaken

Mihir Kapadia, CEO and Founder, Sun Global Investments

US government bonds weakened for a second consecutive day as investors sold assets perceived as relatively safe after Hurricane Irma abated and geopolitical tensions eased. The yield on the benchmark 10-year US Treasury note rose by 5bps to 2.17 per cent and has seen the biggest two-day jump since early March. Adding to the negative sentiment was a poor response to a $20 billion auction of 10-year notes . This was seen as reflecting a significant reassessment of the risks facing the US economy.

The Trump administration threatened to impose further sanctions on China if Beijing doesn't do more to shut down banks and other Chinese firms aiding North Korea. This follows United Nations Security Council approval of new sanctions against North Korea which had to be diluted significantly from the US’s desired proposals in order to win approval from China and Russia.

In the FX markets the yen has retreated this week as safe-haven bids have faded. The euro has topped Y132 for the first time since February 2016. The euro has been rising on the prospects of the European Central Bank signalling some QE tapering measures in October.

Oil prices are little changed in Asia. Yesterday, the American Petroleum Institute's weekly data showed a bigger gain in US inventories of crude. Hurricane Harvey continues to have an impact on the oil market as the spread between WTI and Brent continues to be high. WTI is at $48.19/barrel while November Brent is at $54.17. 

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