Fiscal concerns put pressure on dollar and bond market

Fiscal concerns put pressure on dollar and bond market

Treasury yields recede from their morning highs, but still inch higher in the long end, as the U.S. budget deficit emerges as a top concern in Wall Street. After Moody’s downgraded the U.S. debt and Congress advanced a bill widely expected to increase the country’s borrowing needs, investors sold off Treasurys and the dollar.

The mood improved during the session, to start a week relatively light on the data front. The 10-year ends up rising 0.036 percentage point, to 4.473%, while the two-year is flat, at 3.980%. The 30-year briefly pierced 5%, before settling up 0.042 p.p., at 4.937%.

Main Headlines on the front page of the Wall Street Journal:

1. Food Trickles Into Gaza as Israel Ends Blockade
   
   • After ending a blockade, Israel allowed limited humanitarian aid into the Gaza Strip. Palestinians were shown scrambling for food. Israeli PM Netanyahu asserted military control would persist.
     
2. Putin Spurns Calls for Immediate Cease-Fire
   
   • Despite a two-hour call with Donald Trump, Russian President Vladimir Putin refused a cease-fire in Ukraine, although some diplomatic progress was hinted.
     
3. Fiscal Concerns Hit Dollar and Bonds
   
   • Investors reacted negatively to Moody’s potential U.S. credit rating downgrade. Bond yields rose amid federal deficit concerns and heavy government borrowing.
     
4. America’s College Towns Go From Boom to Bust
   
   • Smaller college towns face economic strain as declining student populations lead to closures of dorms and local businesses.
     
5. U.K., EU Strike Accord on Security, Trade Ties
   
   • A fresh U.K.-EU agreement was struck to improve post-Brexit trade and defense cooperation.