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U.S. Treasuries sag amid Fed hike talk

The U.S. Treasuries slid after reading US FOMC April meeting minutes and hawkish comments from Federal Reserve officials strengthened bets of an interest rate hike in June. The yield on the benchmark 10-year Treasury note rose 2bps to 1.865 pct and the yield on the short-term 2-year Treasury bond also climbed 2bps to 0.901 pct by 1215 GMT.

The U.S bonds plunged after minute release from the April FOMC meeting that indicated policymakers were in support of a move to raise rates in June if the economy supported it. The FOMC in its April 26-27 meeting minutes showed quite a hawkish view of Fed officials. This indicates that several participants believed in April that it is appropriate to raise rates in June if the incoming data indicated a rebound in the economy.

On balance, these minutes go a long way in uncovering sentiment not very much reflected in the April FOMC statement. On balance, this release should go a long way in making the June meeting a live event, something that was seen as less likely in the wake of the April meeting. However, given the need for data to cooperate as the meeting approaches, nothing is certain. Nevertheless, we continue to expect only 50bps worth of tightening from the FOMC in 2016, regardless of whether or not they choose to act in June.

The US Initial jobless claims for the week ending 14 May decreased -16k to 278k, just above expectations for a 275k, from unrevised 294k reading seen in the week prior. The 4-week average was reported at 275.8k, from the unrevised 268.3k reading seen in the week prior. Meanwhile, continuing claims for week ending 7 May decreased to 2.152mln, versus the revised 2.165mln reading seen prior (previous 2.161 million). The insured unemployment rate held unchanged at 1.6 pct.

Markets now look ahead to existing home sales data to finish off the week. Meanwhile, S&P 500 Futures rose 0.31 pts to 2,045 by 1215 GMT.

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August 16 12:30 UTC Released

USHousing Starts Number MM

Actual

1.155 mln

Forecast

1.220 mln

Previous

1.215 mln

August 16 12:30 UTC Released

USBuild Permits: Change MM

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-4.1 %

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9.2 %

August 16 15:30 UTC 120120m

BRForeign Exchange Flows*

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0.361 Bln USD

August 16 23:50 UTC 620620m

JPForeign Bond Investment

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1624.2 bln JPY

August 16 23:50 UTC 620620m

JPForeign Invest JP Stock

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-37.7 bln JPY

August 16 23:50 UTC 620620m

JPExports YY*

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13.6 %

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9.7 %

August 16 23:50 UTC 620620m

JPImports YY*

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17.0 %

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15.5 %

August 16 23:50 UTC 620620m

JPTrade Balance Total Yen*

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392.0 bln JPY

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439.9 bln JPY

August 17 01:30 UTC 720720m

AUFull Time Employment*

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62.0 k

August 17 01:30 UTC 720720m

AUEmployment*

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20.0 k

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14.0 k

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