Bond Report: 10-year Treasury yield retreats below 1.90% amid trade uncertainty and Hong Kong protests

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U.S. Treasury yields slipped on Wednesday as uncertainty on tariff rollbacks and protests in Hong Kong drove investors to take shelter in government paper.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, -1.72%   slipped 3.9 basis points to 1.870%, while the 2-year note rate TMUBMUSD02Y, -0.97%   was down 2.2 basis points to 1.628%. The 30-year bond yield TMUBMUSD30Y, -2.04%   retreated 3.7 basis points to 2.348%.

What’s driving Treasurys?

A surge of haven inflows came as pessimism grew around the prospect of tariff rollbacks as part of the discussed phase one U.S.-China trade deal. President Donald Trump offered few details on trade negotiations on Wednesday, only saying that he expected an agreement to be struck soon. Neither did Trump say whether he would slap tariffs on European auto imports.

Last week, both Washington and Beijing initially appeared to favor a rollback in tariffs, but Trump and his economic adviser Peter Navarro later said they hadn’t agreed to any such arrangement.

Market participants were also rattled by the intensifying protests in Hong Kong, a key financial center in Asia, Reuters reported. Disputes between police and demonstrators have broken out all over the city, extending the turmoil beyond the weekend.

In economic data, the U.S. consumer price index for October is due at 8:30 a.m. ET, which could point to any incipient inflationary pressures bubbling in the economy. Economists polled by MarketWatch expect an 0.3% increase last month, and an 0.2% increase for the core gauge stripping out for food and energy prices.

See: Here’s why inflation no longer drives the bond-market

As for the Federal Reserve, Fed Chairman Jerome Powell is set to testify at 11 a.m. ET, followed by Minneapolis Fed President Neel Kashkari at 1:30 p.m. Powell is expected to reiterate the U.S. central bank’s view that monetary policy should stay on hold unless the economic outlook materially changes.

What did market participants’ say?

“On trade, his policy of encouragement laced with threatened retaliation to correct past injustices continues. A ‘Phase 1’ trade deal with China could come soon but beyond that, there were plenty of warnings about the implications of the Chinese, and others, ‘mistreating’ the US. There was no reassurance that import tariffs on European cars aren’t coming. If I were an expert tango dancer, I’m sure I’d know what move comes next but as it is, it looks more like a random walk,” wrote Kit Juckes, a global macro strategist at Société Générale.

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