US Treasuries halt rally on firm market sentiments

The US Treasury gains finally stalled on Wednesday, alongside a rebound in equity prices and a renewed push in crude oil prices back towards the $50 mark. The yield on the benchmark 10-year Treasury note rose 1-1/2 basis point to 1.476 percent and the yield on short-term 2-year note climbed 2 basis points to 0.629 percent by 12:45 GMT.

Although the modest selling hardly provided any sense of being out of the woods following the UK’s decision to break away from the EU, some sense of stabilization was gladly welcomed. Overall, the 2-year yield pushed higher on the session, breaking back above 0.60 percent, alongside a greater increase in the 10-year yield, back above 1.45 percent.

From a data standpoint, markets saw modest further gains in 1Q16 GDP revisions, finishing off around +1.1 percent and a significant improvement from the preliminary release. The final 1Q16 GDP reading increased +1.1 percent (preliminary: +0.8 percent), versus the unrevised +1.4 percent reading seen in 4Q15, just above market expectations for a +1.0 percent result.

Personal consumption increased +1.5 percent (preliminary: +1.9 percent), versus the +2.4 percent reading seen in 4Q15. Core PCE increased +2.0 percent, following the +1.3 percent increase seen in 4Q15. Residential investment increased +15.6 percent in 1Q16, versus the +10.1 percent seen in 4Q15.

Also, exports increased +0.3 percent in 1Q16, alongside a -0.5 percent decrease from imports. According to the release, downward pressure from private inventories contributed -0.23 percent to the headline estimate, versus -0.22 percent seen in 4Q15.

Despite the upward revisions seen in the headline measure, this report clearly reflects the weaker tone of data seen to open the year. Although a number of releases continue to reflect current economic dampness, the potential for a rebound in inventories in the months ahead should provide a boost to growth as we move further into 2016.

Lastly, crude oil prices rose as investors took advantage of a two-day slide in crude following Britain's vote to leave the European Union to lock in lower prices. A looming strike at several Norwegian oil and gas fields threatened to cut output in western Europe's biggest producer, also helped support prices on Tuesday. The International benchmark Brent futures rose 0.95 percent to $49.73 and West Texas Intermediate (WTI) climbed 0.96 percent to $48.31.

Markets now look ahead to pending home sales data on Wednesday, followed later by EIA inventories data, serving to potentially push oil prices back towards the $50-mark.

Meanwhile, the S&P 500 Futures up 15.50 points to 2,044 by 12:40 GMT.