Bond Report: Treasury yields rise as Syria jitters fade

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Treasury prices fell on Monday, pushing up yields and giving the week’s start a bearish tone as fears over an escalation of hostilities in Syria faded, pushing investors out of U.S. government paper.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, +1.24% climbed 3.2 basis points to 2.860%, the 2-year note yield TMUBMUSD02Y, +1.76% rose 1.7 basis point to 2.386%. The 30-year bond yield TMUBMUSD30Y, +1.24% added 2.8 basis points to 3.064%.

Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

With fears fading over U.S. military intervention in Syria, investors who had sought shelter in Treasurys switched back into risky assets, with stocks set to open higher. The U.S., Britain and France launched missile strikes in Syria against chemical weapons sites while leaving President Bashar al-Assad’s conventional military facilities intact. That helped ease concerns the U.S. would escalate tensions with Russia, which has backed the incumbent Syrian regime.

See: Syria brushes off U.S.-led airstrikes, launches new attacks against rebels

That also put economic data back on the radar of investors who are contending with the potential for inflation to hit the Federal Reserve’s 2% target range, raising the risk of the central bank to lean toward a more aggressive hiking trajectory. A strong retail sales figure on early Monday could give a better picture of building inflationary pressures.

Read: Fed’s Kashkari says fiscal stimulus supports moving ahead with interest-rate tightening

What did market participants say?

“The Syrian action was by far the most relevant event influencing the overnight price action and we’re admittedly somewhat surprised to see it triggered a ‘risk on’ move. While there hasn’t been much in terms of a Russian response, we’re skeptical that the net takeaway should be to conclude geopolitical risks are lower as a result. Nonetheless, equity futures are higher overnight and Treasurys are under pressure,” said Ian Lyngen and Aaron Kohli, fixed-income strategists at BMO Capital Markets, in a note.

What economic data is set to come?

Retail sales are set to come in at 8:30 a.m. Eastern. Economists polled by MarketWatch forecast a gain of 0.4% in March, from the 0.1% drop in the previous month. The Empire State Index, a survey of manufacturing conditions in New York state, will arrive at 10 a.m., at the same time as business inventories for February.

Atlanta Fed President Raphael Bostic will give a talk at 12:15 p.m. on the economy and rural market trends.

See: Economic Calendar

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