US Treasury yields poke monthly top, S&P 500 Futures remain sluggish amid mixed sentiment

• US 10-year Treasury yields remain firmer after at monthly high after the heaviest daily jump in three weeks.
• S&P 500 Futures fail to track Wall Street as concerns over Omicron, light calendar tests equity bulls.
• US seven-year bond auction, downbeat US data triggered a rally in the US Treasury coupons.

Market sentiment struggles for clear direction after a volatile Wednesday. Even so, the US Treasury yields stay strong and the stock futures print mild losses by the press time of early Thursday’s Asian session.

The US Treasury yields rallied the most in three weeks the previous day after an auction of the US seven-week Treasury bond showed disappointing demand for the government securities during the holiday period. “The seven-year notes sold at a high yield of 1.48%, around two basis points higher than where they had traded before the auction,” said Reuters.

Adding to the bullish bias for the yields could be the downbeat US data and firmer inflation expectations.

On Wednesday, the US Pending Home Sales for November dropped below the forecast of +0.5% to -2.2% MoM whereas Good Trade Balance hit a record deficit of $-97.8B versus $-83.2B prior. Alternatively, A jump in the US inflation expectations, as portrayed by 10-Year Breakeven Inflation Rate numbers from the Federal Reserve Bank of St. Louis (FRED) back the Fed-rate-hike woes. The inflation gauge refreshed the monthly top to 2.53% at the latest.

It’s worth observing that fears of the South African covid variant, namely Omicron, join recent geopolitical headlines concerning Iran and China to weigh on the market sentiment.

“Almost 900,000 cases were detected on average each day around the world between Dec. 22 and 28, with myriad countries posting new all-time highs in the previous 24 hours, including the United States, Australia, many in Europe and Bolivia,” said Reuters. Recently, US Secretary of State Antony Blinken said, “The US urges Chinese and Hong Kong authorities to release stand news staff members immediately.” Earlier in the day, Saudi Arabia’s King Salman bin Abdulaziz raised concerns over Iran’s lack of cooperation with the international community on its nuclear program and ballistic missile development.

Amid these plays, the US 10-year Treasury yields seesaw around 1.55% while the S&P 500 Futures print mild losses near 4,784. Further, Asia-Pacific stocks trade mixed to track their Wall Street counterparts.

Looking forward, the US Weekly Jobless Claims and Chicago Purchasing Managers’ Index for December, expected 205K and 62 versus 205K and 61.8 respectively, will decorate the calendar and should be observed for fresh clues. However, major attention will be given to the risk catalyst for clear direction

Above all, the year-end liquidity crunch and a light calendar may keep testing the market moves.