ING strategists Benjamin Schroeder and Michiel Tukker note that US yield curves are steepening as front-end rates fall on softer jobs expectations while long-end yields rise on supply concerns. They highlight worries about foreign demand for US Treasuries and the impact of large upcoming auctions, including new 3Y, 10Y and 30Y US government bonds.

Front-end pressured, long-end under strain

"In the US, front-end rates have been weighed down primarily by comments from Kevin Hassett, Director of the National Economic Council, hinting that one should expect smaller job numbers given ongoing population trends. Markets seem to have interpreted this also as a warning ahead of this week’s delayed jobs data for January."

"But supply concerns also featured, because over the weekend Chinese regulators warned domestic financial institutions about high US Treasury holdings. Such comments underscore ongoing concerns about the declining appetite of foreign investors to finance historically high US deficits. So while the front-end yields came down, the back-end of the curve saw yields rising."

"Concurrent bond supply themes are amplifying long-end dynamics. The US Treasury is this week auctioning new 3y, 10y and 30y bonds. On top of that, the market was also digesting the news of large tech company issuance in dollars and sterling – out to the 40y maturity in US$ and out to the 100y maturity in sterling."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)