U.S. Treasuries plunge ahead of FOMC meeting, host of 3-tier economic data

The U.S. Treasuries plunged during Monday’s evening session as investors await the conclusion of the latest FOMC meeting on Wednesday, where the central bank is highly expected to adopt a 25bp interest rate cut, market pricing having risen to 90 percent for the same.

Also, a host of 3-tier economic data throughout this week, shall keep on adding insight to the bond market.

The yield on the benchmark 10-year Treasury yield jumped 3-1/2 basis points to 1.837 percent, the super-long 30-year bond yield also surged 3-1/2 basis points to 2.327 percent and the yield on the short-term 2-year traded 2-1/2 basis points up at 1.652 percent by 14:00GMT.

Of course, the main event in the US will be the conclusion of the latest FOMC meeting on Wednesday. The outcome is more uncertain than recent meetings, although the Fed might not want to upset the markets, which are pricing in a near-90 percent probability of a rate cut, Daiwa Capital Markets reported.

But with economic momentum slowing, risks to the outlook skewed to the downside, and various Committee members having noted the importance of acting pre-emptively, on balance, the FFR target range is expected to be cut by 25bps to 1.50-1.75 percent, the report added.

It will be a busy one for top-tier US data too, with the first estimate of Q3 GDP (Wednesday) and October's labour market report and manufacturing ISM (Friday) the highlights. Having slowed in Q2 to 2 percent q/q annualised, GDP growth is expected to have moderated further in Q3 to 1.6 percent q/q ann. which (aside from the Government shutdown related slowdown in Q418) would be softest pace for almost four years.

The increase in non-farm payrolls at the start of Q4 is also expected to be much softer than of late, with a forecast increase of 95k likely to see the unemployment rate nudge slightly higher to 3.6 percent. And while the headline manufacturing ISM is expected to largely reverse September’s decline it is still expected to remain in contractionary territory for the third consecutive month, Daiwa further noted in the report.

Meanwhile, the S&P 500 Futures remained tad 0.62 percent higher at 3,039.12 by 14:05GMT.