Treasury Yields Steady As Bonds Consolidate After Selloff — BOND REPORT

German Bund yields fell back to zero on Tuesday after a top U.S. Federal Reserve official argued against hiking rates too soon, easing concerns that central banks globally were stepping back from looser monetary policy. 20-21 meeting. Fed governor Lael Brainard was suddenly scheduled late last week to give a talk in Chicago on Monday.

Oil prices fell on concerns over increased USA drilling and as investor took profits on Monday’s gains of almost 1 percent. [NL1N1BO13V] Future traders are now pricing in a 15 percent chance of a hike at the Fed’s September 20-21 policy-setting meeting, down from 21 percent earlier on Monday, according to the CME Group’s FedWatch Tool.

Fed Governor Lael Brainard’s remarks on Monday saw already slim expectations of a rate hike this month reduced further, helping weaken the dollar and push US stocks higher and yields on low-risk government bonds lower. However, another trigger for the turmoil of the last few days was disappointment that the European Central Bank did not signal an extension of its bond-buying stimulus programme at its meeting last Thursday.

Brainard’s words, the last from a Fed official before the US central bank’s September policy meeting, followed three volatile trading days in which bond yields soared and stocks racked up heavy losses, chiefly on concern the era of supercharged monetary stimulus could be coming to an end.

In recent trading, the yield on the benchmark 10-year Treasury note was 1.68%, according to Tradeweb, compared with 1.671% on Monday.

Brent crude was down 0.7 percent at $47.98 a barrel after rising 0.65 percent overnight on a weaker dollar and stronger USA equity markets.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.4 percent, after tumbling 2.4 percent on Monday.

“This rebound looks weak to me, and lacking in conviction”. Japan’s Nikkei .n225 added 0.6 percent, South Korea’s Kospi .ks11 rose 0.9 percent and Australian stocks .axjo advanced 0.7 percent.

Major European stock indexes fell as much as 2pc during the day before regaining some ground, and putting them on course for their biggest losses since June, and Wall Street futures pointed to a fall of 0.7pc at the open.

Copper climbed off a 12-week low as USA rate hike jitters subsided.

At least EMini futures for the S&P 500 showed some resilience, with a small dip of 0.2 per cent. The euro dipped 0.1 percent to $1.1220 while the yen was all but flat at 101.90 per dollar.

Against the dollar, the common currency edged up 0.1% to $1.1238.

“We’ve had a number of supportive comments from the policy hawks, but they are still struggling to convince the market”.

The move “could be reflecting some dovish expectations ahead of the Bank of Japan meeting next week”, said Eric Viloria, currency strategist at Wells Fargo Securities in NY.

Brent crude was off 69 cents, or about 1.5 per cent, at $47.32 a barrel, while U.S. crude lost 74 cents to $45.14.

“The flow picture is more favorable compared to previous year as the European Central Bank has beefed up quantitative easing to 80 billion euros per month and weekly purchases having returned to the pre-summer run-rate in excess of 16 billion last week”, they said in a note.