(Bloomberg) — Treasuries fell in US trading Tuesday after an indication of labor-market strength encouraged investors to sell the rally that briefly ensued after South Korea’s president declared martial law.
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The two-year note’s yield slid as much as 4 basis points to 4.14%, the lowest level since Nov. 4. Longer-dated yields also fell to session lows before rebounding. The yield declines began to be pared after a gauge of US job openings rose more than expected and were erased before midday in New York after South Korean lawmakers voted to request lifting martial law.
“Having a range mentality in Treasuries is the way until you get clearer data trends,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. Treasuries are appealing as yields approach 4.5% and overvalued near 4%, he said.
South Korean President Yoon Suk Yeol announced the action in a live-televised address that sent the won sharply lower before stabilizing. Meanwhile, turmoil in France intensified with far-right leader Marine Le Pen expected to join forces with a left-wing coalition to topple the government.
The burst of haven demand for Treasuries followed on the heels of a late-Monday rally sparked by Federal Reserve Governor Christopher Waller, who said he leaned toward supporting another interest-rate cut on Dec. 18.
Speaking Tuesday, San Francisco Fed President Mary Daly said a December rate cut would leave policy at restrictive levels, and Fed Governor Adriana Kugler said inflation remains sustainably headed toward the 2% goal. Chicago Fed President Austan Goolsbee is slated to speak beginning at 1:30 p.m. New York time, and Fed Chair Jerome Powell has a Wednesday appearance slated.
Powell’s talk “will surely set the tone for the December rate decision,” John Ryding, chief economic advisor at Brean Capital, wrote in a note.
Traders remain highly uncertain about the outcome of the meeting, which Fed officials have said will depend on the strength of economic data in the meantime. In particular, the US government’s November employment report is due out Friday, and Waller also said additional economic data could change his mind.
Interest-rate strategists at JPMorgan Chase & Co., who had recommended buying two-year Treasuries in mid-November, advised taking profits on the trade in anticipation that the jobs report will show job growth exceeding the consensus forecast.
October JOLTS job openings released Tuesday rose more than anticipated — a sign of labor-market health with the potential to make the Fed less inclined to cut interest rates quickly.