Mnuchin’s Likely Attempt at Talking Yields Higher Fails to Work

(Bloomberg) -- To some market watchers, U.S. Treasury Secretary Steven Mnuchin’s comments on ultra-long bonds may have been an attempt to drive yields higher. One that seems to have been in vain.

Issuing ultra-long debt is “under very serious consideration,” Mnuchin told Bloomberg News on Wednesday. While the benchmark 30-year yield rebounded from an all-time low and the U.S. yield curve steepened following those remarks, much of those moves reversed early in Asia trading Thursday.

Mnuchin “might have tried to lift long-dated yields given that the yield curve inversion is seen as a sign of recession,” said Hidehiro Joke, a bond strategist at Mizuho Securities Co. in Tokyo. “There was no need for Mnuchin to make remarks that could prompt selling of Treasuries. Yields will struggle to rise” due to the U.S.-China trade conflict, he said.

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The shape of the Treasury yield curve has been a topic of hot debate among market participants lately after an inversion of the closely-watched 10-year and 2-year part sparked concerns about an impending U.S. recession. President Donald Trump has publicly criticized Federal Reserve Chairman Jerome Powell for raising interest rates in 2018.

Thirty-year U.S. bonds resumed their advance on Thursday, with yields down five basis points at 1.92%.

The gap between five- and 30-year Treasury yields had widened to 59 basis points late Wednesday, from 56 basis points just before Mnuchin’s comments. The spread was at 57 as of 11:15 a.m. in Tokyo.

To contact the reporter on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net

To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Shikhar Balwani

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