US government debt prices were higher on Monday morning as a dramatic drop in the Turkish lira sparked fears of a new currency crisis.
At around 9:00 a.m. ET, the 10-year Treasury benchmark yield was lower at 1.698%, while the yield on the 30-year Treasury bond fell to 2.41%. The returns move inversely to the prices.
The 10-year yield was 1.7% late last week, a 14-month high, while the 30-year yield rose briefly above 2.5%. The sharp rise in yields followed comments from the Federal Reserve and its chairman Jerome Powell that the central bank would allow higher inflation. The 10 year return started the year below 1%.
The latest steps come shortly after Turkish President Recep Tayyip Erdogan abruptly replaced the head of the country’s central bank and triggered shock waves in the financial markets.
The sudden departure of Naci Agbal as governor of Turkey’s central bank early on Saturday pushed the lira to lows last seen in November. The US dollar was last traded 7% against the Turkish lira at 7.9317.
The news is expected to have an impact on other emerging markets exposed to the lira.
A host of speakers from the US Federal Reserve are expected to comment on the US economic outlook on Monday. Chairman Powell will address the virtual event of the Bank for International Settlements Innovation Summit at 9:00 a.m.CET.
Richmond Fed President Thomas Barkin, San Francisco Fed President Mary Daly, Fed Vice Chairman Randal Quarles, and Fed Governor Michelle Bowman are expected to attend various events throughout the trading session.
The existing home sales for February at around 10 a.m. CET will be published on the data front.
The U.S. Treasury Department will auction $ 57 billion worth of 13-week bills and $ 54 billion worth of 26-week bills on Monday.
– CNBC’s Vicky McKeever contributed to this report.
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