USD Rates: Flight-to-safety unlikely to last
Softening bond yields on sinking equities.
Group Research - Econs, Samuel Tse24 Jun 2026
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UST yields are retreating as investors seek safe haven assets amidst global equity market retrenchment, with the 2Y yield falling from 4.23% on Monday to 4.19%. However, further downside appears limited in the near term, as the repricing of the Fed's easing path has yet to be seen. The US economy continues to display resilience. The weekly ADP employment change (on a 4-week moving average basis), released overnight at 30.75k, has reversed its downtrend. This indicates that private sector hiring remains sturdy. Initial jobless claims are on the rise albeit remain relatively low (consensus at 225k). The labor market demand-supply balance is largely steady. Thus far, both the labor force and total job opportunities (employment + job openings) stand at approximately 170mn. Beyond the labor market, both the S&P Manufacturing and Services PMIs continue their upward march and have beaten market consensus.



Meanwhile, heavy bond supplies this week are restraining the rally of short-end USTs. Against the backdrop of firm economic conditions and a hawkish Fed, the results of the UST bills issuance on Monday have been mixed. The bid-to-cover ratio of 6-month bills has fallen from 2.76x to 2.51x. Although that of 3-month bills has risen, high yields of both tenors have increased above their respective previous levels. Investors are watchful over the upcoming auctions for 2Y, 5Y, and 7Y USTs. The upshot is that steepening is unlikely to return in the immediate term.

Samuel Tse 謝家曦

Rates Strategist - Asia 利率策略师 - 亚洲
samueltse@dbs.com

 

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