U.S. Treasuries plunges on hopes of higher Q2 GDP; investors await FOMC member Kashkari’s speech

The U.S. Treasuries lost on hopes that the country’s Q2 GDP, scheduled to be released later today, will witness an upward expansion, compared to that in the previous quarter and ahead of the FOMC member Neel Kashkari’s speech, also due later today.

The yield on the benchmark 10-year Treasury, rose 2 basis points to 2.33 percent, the super-long 30-year bond yields climbed nearly 1 basis point to 2.93 percent and the yield on short-term 2-year note traded 1-1/2 basis points higher at 1.37 percent by 11:40GMT.

US GDP growth is expected to have picked up in Q2. We forecast quarterly annualised growth of 2.8 percent, close to the market consensus forecast of 2.7 percent. That is well above most estimates of ‘trend’ economic growth and about double the lacklustre pace of Q1 growth.

However, it is weaker growth than many were forecasting for Q2 just a few weeks ago. The rebound is likely to have been led by stronger consumer spending growth and a turnaround in inventories. In contrast, both business and housing investment growth is forecast to be slower than in the previous quarter, while net exports are also forecast to contribute less to growth.

Also due in the US is the Q2 employment cost index, which is a more comprehensive measure of labour costs than the monthly wage report. It is expected to show costs still only rising modestly. Minneapolis Fed President Kashkari will be the first FOMC member to speak following Wednesday’s policy announcement.

Meanwhile, the S&P 500 Futures traded 0.28 percent lower at 2,465.00 by 11:40GMT, while at 11:00GMT, the FxWirePro's Hourly Dollar Strength Index remained neutral at -50.87 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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