After moving sharply lower over the past several sessions, treasuries regained some ground during the trading day on Monday.
Bond prices moved to the upside early in the session and remained firmly positive throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.2 basis points to 1.841 percent.
The pullback by the ten-year yield came after it surged up by 11.2 basis points last Friday, ending the session at its highest closing level in well over a month.
Treasuries benefited from their appeal as a safe haven amid a spike by the price of crude oil, with brent crude futures showing the biggest intraday jump on record after a coordinated drone attack on Saudi Arabia’s oil industry.
Crude for October delivery skyrocketed $8.05 to $62.90 a barrel, raising concerns about the impact higher energy prices could have on the already fragile global economy.
The jump in oil prices came as attacks on an oil processing facility at Abqaiq and the nearby Khurais oil field cut Saudi Arabia’s daily crude oil output in half.
Responding to the news, President Donald Trump said he has authorized the release of oil from the Strategic Petroleum Reserve if necessary to keep the markets well supplied.
Trump also tweeted the U.S. is “locked and loaded” to the respond to the attacks, with Secretary of State Mike Pompeo pointing the finger at Iran.
A potential military conflict between the U.S. and Iran would weigh on a global economy that is already being dragged down by the U.S.-China trade war.
On the U.S. economic front, the Federal Reserve Bank of New York released a report showing New York-area manufacturing activity was little changed in the month of September.
The New York Fed said its general business conditions index dipped to 2.0 in September from 4.8 in August, although a positive reading still indicates an increase in regional manufacturing activity. Economists had expected the index to edge down to 4.0.
Later this week, the Federal Reserve is scheduled to announce its latest monetary policy decision, with the central bank widely expected to cut interest rates by another 25 basis points.
Trump has been pressuring the Fed for a larger rate cut, pointing to the stimulus announced by other central banks around the world.
“The United States, because of the Federal Reserve, is paying a MUCH higher Interest Rate than other competing countries,” Trump tweeted.
He added, “They can’t believe how lucky they are that Jay Powell & the Fed don’t have a clue. And now, on top of it all, the Oil hit. Big Interest Rate Drop, Stimulus!”
News out of the Middle East may continue to attract attention on Tuesday, potentially overshadowing reports on industrial production and homebuilder confidence.
Trading activity may remain somewhat subdued, however, as traders await the Fed’s decision and accompanying statement on Wednesday.
The material has been provided by InstaForex Company – www.instaforex.com