Treasury Yields Increase As Traders Expect Higher Inflation
S&P 500 futures are losing ground in premarket trading as traders sell stocks amid rising Treasury yields.
The yield of 30-year Treasuries has recently made an attempt to settle above 2.19%, while the yield of 10-year Treasuries tried to get above 1.39%. Rising Treasury yields may serve as a bearish catalyst for stocks as higher yields make bonds a more attractive investment. This week, traders will also remain focused on the U.S. stimulus story which has served as the main catalyst behind the recent increase in Treasury yields.
Interestingly, rising yields did not put pressure on precious metals today, and gold is currently trying to get back above the $1800 level. If this attempt is successful, shares of gold miners will have a good chance to rebound after the recent sell-off.
Oil Rebounds After Recent Pullback
WTI oil managed to get back to the $60 level as traders bet on a slow return of U.S. production after the cold weather. Analysts believe that the industry will need more days to restart the lost output which is bullish for oil prices.
The general bullish mood in the commodity markets provides additional support to oil. Investors are bullish on commodities which is especially visible in the copper market as copper has recently managed to settle above $4.00 per pound. Copper has not visited this territory since 2011.
If WTI oil settles above the $60 level, it will have a good chance to gain additional upside momentum which will provide more support to oil-related equties.
U.S. Dollar Mixed As Traders Evaluate The Recent Developments In The Bond Market
The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is currently stuck in a tight range between the support at 90.30 and the resistance at 90.50.
Rising yields provide support to the American currency, but the market expects that the U.S. will soon deliver a new round of stimulus which is bearish for safe-haven assets like the U.S. dollar.
The fragile balance cannot last long, so the U.S. dollar will soon get out of the current trading range. If the U.S. Dollar Index declines below the support at 90.30, it will gain downside momentum and move towards the psychologically important 90 level. Weaker dollar will likely provide additional support to dollar-denominated assets, including equities.
For a look at all of today’s economic events, check out our economic calendar.