Treasury Prices Rise as Factory Activity Gauge Contracts More Than Expected

　　

Treasury prices climbed higher on Monday as a US factory activity gauge contracted more than expected. This news tempered concerns about inflation that were fueled by OPEC+’s surprise decision to cut oil production. Let’s take a closer look at what happened.

In March, the Institute for Supply Management’s gauge of manufacturing activity dropped to 46.3. This was below the median estimate of 47.5 in a Bloomberg survey of economists. Any readings below 50 indicate a contraction, and both measures of new orders and employment decreased. As a result, two-year yields, which are sensitive to policy changes, reversed course after earlier climbing by as much as 11 basis points.

On Friday, the government will release its monthly employment report. This report will provide a more complete picture of the job market. It will be interesting to see how this report affects Treasury prices in the coming days.

Swaps linked to expectations of interest rates from the Federal Reserve indicated that a quarter-point hike in May was more likely than not. This news could also impact Treasury prices in the future.

In the benchmark, energy shares led gains in the S&P 500, with US crude hitting $80 a barrel. Seven out of eleven sectors in the S&P 500 stayed in the positive territory, as energy surged with 4.91% daily gain on Monday.

The Nasdaq 100 underperformed major benchmarks as Tesla Inc. sank on data showing its price cuts barely boosted deliveries. This news is noteworthy, as Tesla is often seen as a bellwether for the tech industry.

Main Pairs Movement

On Monday, the US Dollar experienced a 0.44% decline as investors anticipated a less aggressive stance from the Federal Reserve. The DXY index saw significant selling activity throughout the day, dropping below 102 during the start of the American trading session.

In contrast, the EURUSD pair saw a 0.55% increase in value, with the market mood improving during London’s trading session. The pair continued to rise and surpassed the 1.0900 level during the New York trading session. Similarly, the GBPUSD pair also gained strength following the start of the UK trading hour.

Gold prices rose by 0.78% as the Greenback weakened further after the release of disappointing US economic data. XAUUSD reached a daily high of $1990 before entering a consolidation phase and hovering in a narrow range between $1980 and $1986.

Economic Data

Currency	Data	Time (GMT + 8)	Forecast
INR	Holiday – Mahavir Jayanti	All day	N/A
AUD	RBA Interest Rate Decision (Apr)	12:30	3.60%
AUD	RBA Rate Statement	12:30	N/A
USD	JOLTs Job Openings (Feb)	22:00	10.400M