Bond Report: Treasury yields extend slide as investors confront renewed trade and economic concerns

This post was originally published on this site

U.S. Treasury yields slipped Thursday as investors eyed weakening economic data in Asia, along with political jitters around the globe and uncertain progress toward a partial U.S.-China. trade pact.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, -4.06% fell 5.6 basis points to 1.813%, down from 1.930% at the end of last Friday, while the 30-year bond rate TMUBMUSD30Y, -2.96%  tumbled 5.2 basis points to 2.297%. The 2-year note yield TMUBMUSD02Y, -2.48% slipped 4.1 basis points to 1.587%.

Debt prices rise as yields fall.

What’s driving Treasurys?

The Commerce Ministry said the U.S. and China were holding “in-depth” discussion on the partial trade agreement, emphasizing that the cancellation of tariffs was important to concluding a deal. On Wednesday news reports said negotiations had run into difficulties over China’s pledge to buy up farm goods, with Beijing unwilling to commit to a specific amount.

The renewed uncertainty around trade helped to unwind some of the selloff in European debt markets. The 10-year German government bond yield TMBMKDE-10Y, -17.05% fell 4.9 basis points to negative 0.351% on Thursday, from negative 0.241% at the start of the week.

China’s economy is also showing fresh signs of weakness even as inflation continues to tick higher—a conundrum for policy makers as the trade dispute with the U.S. drags on. Readings of economic growth slowed further in October, government data showed on Thursday, with disappointing numbers in industrial output, household consumption and fixed-asset investment.

Meanwhile, Hong Kong protests continued to simmer in the background. A state-backed Chinese newspaper issued a tweet saying the Hong Kong government was expected to announce a curfew on the weekend, but later retracted the comment after its editor there was not “sufficient information” to support the assertion.

In U.S. economic data, weekly jobless claims came in at 225,000. Producer prices for October were up 0.4%.

Thursday’s docket was packed with speakers from the Federal Reserve. St. Louis Fed President James Bullard said he remained concerned about the possibility of a “sharper-than-expected slowdown.” Fed Chairman Jerome Powell said he didn’t see bubbles that the central bank might want to pop, and that the “day of reckoning” for the U.S.’s ballooning deficits looked far away.

What did market participants’ say?

“The HK protests are going to get larger and probably more violent as we go through the coming weeks. That’s the biggest geopolitical risk out there,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities. “You’re starting to see momentum turn, with a decent rally in fixed income in Europe, and that’s feeding into our markets.”

Add Comment