US Treasury bond yields rally to refresh multi-day tops at the weekly open

• US T-bond coupons begin the trading week on a firmer footing.
• 10-year, 5-year yields rise to the highest in two years, 2-year coupon jump to the February 2020 levels.
• Market sentiment dwindles amid a lack of major data/events, Fed rate-hike concerns.

Yields of the US government bonds print a strong start to the week after an extended weekend due to Martin Luther King’s Birthday.

That said, the benchmark 10-year Treasury yields rose 4.2 basis points (bps) to 1.814% while the 5-year counterpart also jumped over four bps to 1.5993%. In doing so, both these key bond coupons refresh the highest levels in two years.

Elsewhere, the 2-year US Treasury yields rose above 1.0% for the first time since February 2020, up 3.9 bps to 1.006% whereas the 20-year T-bond yields rise 3.3 bps to 2.208%, the highest since June 2021.

The jump in the bond yields could be linked to the escalating hopes of the faster Fed rate hikes in 2022, backed by Federal Reserve Bank of San Francisco President Mary Daly and New York Fed President John Williams on Friday. While portraying the hawkish Fed scenario ahead of next week’s Federal Open Market Committee (FOMC) meeting, the yields pay a little heed to the softer prints of the US Retail Sales for December and Michigan Consumer Sentiment Index for January.

It’s worth observing that S&P 500 Futures remain lackluster around 4,660 while commodities and Antipodeans copy the moves as market turns cautious ahead of the US traders’ return, as well as ahead of the key Bank of Japan (BOJ) monetary policy and the UK jobs report.

In addition to the BOJ and UK employment data, mixed updates concerning Omicron and the chatters suggesting China’s likely rate cut, coupled with talks of Fed’s next moves, will be crucial for the market’s near-term direction.

That said, the US Dollar Index (DXY) stretched the previous day’s rebound from a 10-week low before ending Monday with minor gains around 95.23.

Read: The point is to talk between what the market perceives as needed and what the Fed determines is right