Global Bond Yields Rise Ahead of Central Bank Meetings; Debt Ceiling Debate Lurks

Frankfurt (Mar 14)  German borrowing costs surged to a 14-month high Monday and U.S. Treasuries yields continued to rise as investors trimmed fixed income holdings ahead of a series of central bank rate decisions.

U.S. Treasury yields traded as high as 2.63% in London dealing, extending losses ahead of the U.S. Federal Reserve's two-date rate setting meeting in Washington. Futures prices are suggesting a 95.2% chance of a 25 basis point increase Wednesday, while bets on June increase rose to 51.1%.

Fixed income investors, who see faster inflation eroding the value of future payments, have been trimming government bond holdings in advance of the Fed's decision, with Bank of America data indicating 6 consecutive weeks of capital outflows.

In Germany, benchmark 10-year bund yields traded briefly past 50 basis points after the country's Federal Statistics Office confirmed February inflation at 2.2% -- the fastest in four and a half years -- before paring losses to 0.48% after a key sentiment survey from the ZEW Institute showed investor optimism improved slightly less than expected this month amid ongoing political risks in the region.

Beyond the Fed's rate decision Wednesday, fixed income investors are also focused on a series of event risk later this week, including national elections Thursday in the Netherlands and four central bank meetings -- including statements from the Bank of England and the Bank of Japan.

President Donald Trump is also slated to reveal his first 2008 budget Thursday amid an escalating spat between Republican lawmakers and the Executive over healthcare costs and the GOP's plans to repeal and replace the Affordable Care Act.

Source:TheStreet