U.S. Treasury yields fell sharply, sending March 10-Year Treasury Note futures surging on Wednesday. The move had a negative effect on the U.S. Dollar, helping to tighten the spread between U.S. Government Bonds and Japanese Government Bonds. The Australian Dollar was supported as the yield on its 10-year bonds widened against the yield on U.S. bond.
The yield on the benchmark 10-year Treasury note ticked lower to 2.423 percent, while the yield on the 30-year Treasury bond was down at 2.753 percent. Additionally, the yield curve continued to flatten.
The yield on the 2-year German bund hit a high of -0.623 percent, its highest level since July 21, when the 2-year bund yielded as much as -0.619 percent. German bond has been moving lockstep with the United States.
Global yield curves have been flattening as investors foresee rising benchmark rates in the near-term with latent inflation over the near-term.
U.S. Economic Data
A drop in U.S. consumer confidence helped pressure U.S. Treasury yields on Wednesday. Consumer confidence slipped in December, down from 17-year highs in November. The Conference Board’s measure of consumer confidence declined to 122.1 in December, further than the 128.1 anticipated by economists polled by Reuters.
U.S. Home Sales stalled in November after huge climbs this fall, up 0.2 percent. The index was 0.8 percent higher compared to November 2016, the first annual gain since June. The number actually came in better than the -0.4% estimate, but lower than the previous 3.5% gain.
Gold
Gold was driven to its highest level since November 29 on Wednesday, rising for an eighth straight session, as further weakness in the dollar encouraged investors to buy the precious metal and other commodities. Gold is now up more than 3 percent over the last two weeks after the dollar began to weaken following the latest Fed interest rate hike on December 13.
Despite weakening since early September, gold has managed to recover some of its fourth-quarter loss and is now in a position to post a more than 10 percent gain for the year.
Crude Oil
U.S. West Texas Intermediate and international benchmark Brent crude oil prices retreated on Wednesday, failing to add on to the previous session’s strong gains. Nonetheless, the markets remained near their highest levels since 2015. Contributing to the weakness was a low volume which appears to be drying up ahead of the New Year’s weekend.
U.S. Equity Markets
The three major U.S. stock indexes closed higher on Wednesday. Gains in real estate and utilities were able to overcome weakness in the energy and telecommunications sectors. Trading volume was the second-lowest of the year with only Black Friday’s half-day of trading posting lower volume.