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A prolonged drop in U.S. Treasury yields is catching bond and fixed income traders by surprise, as well as other investors in the broader financial markets. The 10-year U.S. Treasury yield dropped below 1.3% on Wednesday, and fell another 7 bps overnight to 1.25%, despite lingering concerns about rising inflation and a gradual removal of Fed stimulus. Treasury yields play an important role in the economy, affecting borrowing costs on everything from mortgages to corporate bonds.

 

Job openings remained at a record high of 9.2M in May, according to the latest data from the Labor Department, though quits dropped slightly to 3.6M, from a historic peak of 3.9M in April. The high demand for labor comes as the economy fully reopens and companies scramble to keep up with soaring sales.  The non-farm payrolls report from last Friday showed the U.S. adding 850K jobs in June, though it would take more than a year at that rate to restore employment to pre-pandemic trends.

 

Some of America’s biggest oil groups are racking up tens of billions of dollars in hedging losses despite soaring crude prices, as contracts signed during last year’s crash leave them selling their output at deeply discounted prices.  Oil is trading near six-year highs of around $75 a barrel, but almost a third of the US’s 11m barrels a day of production is being sold for just $55 a barrel, according to IHS Markit.
 

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