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Treasuries Sell Off as Powell Warns Against Rate Cut

Treasuries resumed a selloff early Monday as Federal Reserve Chair Jerome Powell warned against the likelihood of a rate cut in March, compounding the effect of FridayÔÇÖs strong jobs data. The 10-year Treasury yield climbed around six basis points in early Asian trading as Powell spoke on CBSÔÇÖs 60 minutes, compounding heavy selling Friday that added around 14 basis points to the yield.

PowellÔÇÖs appearance, broadcast Sunday in the US, was recorded prior to jobs data released Friday that showed US companies boosted payrolls in January by the most in a year. The heavy selling in Treasuries Friday rippled across Asian debt markets, weighing on government bonds in Australia and New Zealand on Monday. The 10-year Australian and New Zealand yields rose by around 10 basis points in early trading. The dollar strengthened against major currencies early Monday.

Investor bets for a rate cut in March by the Fed tumbled Friday to around 20% from almost 40% on Thursday, as economic resilience reduces the likelihood of imminent policy easing. Despite forecasts for a March cut weakening, ÔÇ£this market still expects five rate cuts this year,ÔÇØ said Ed Yardeni, president of Yardeni Research, in a note. ÔÇ£Fed officials are likely to continue to push back against that notion of so much cutting,ÔÇØ he said.

Australian and South Korean benchmarks both fell more than 1% Monday, while Japanese equities edged higher. Futures contracts for US equities slipped in Asia trading after the S&P 500 Index climbed 1.1% to a new peak on Friday. A strong run of performances for the benchmark comes as February dawns ÔÇö historically one of the rockiest times of the year for US stocks.

Oil prices advanced following US and UK strikes against Houthi targets over the weekend. The Iran-backed Houthis have vowed to respond. The price of West Texas Intermediate edged higher in opening trade Monday, after falling 7.4% last week, its largest one-week decline since October.

China Vows to Prevent Abnormal Fluctuations

Investors will be closely watching Chinese equity markets, which fell Friday to extend a prolonged slump. Following the heavy selling, the China Securities Regulatory Commission vowed on Sunday to prevent abnormal fluctuations, saying it would guide more medium- and long-term funds into the market. A gauge of US-listed Chinese companies fell more than 1% in New York on Friday, echoing similar declines for mainland China benchmarks.

Elsewhere, former US President Donald Trump also signaled he may impose a tariff on Chinese goods of more than 60% if elected, in a fresh round of hawkish rhetoric aimed at the largest supplier of goods to the US.

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