Oct 7, 2019

Bonds | Treasury Yields Report: Yields rise as traders monitor US-China trade talks

Fred Imbert, Sam Meredith

trader in pit of CME CBOT For FOMC Rate Decision
A trader works in the S&P 500 pit on the floor of the CME Group’s Chicago Board of Trade.
Bloomberg | Bloomberg | Getty Images
U.S. government debt yields edged higher on Monday as traders monitored trade developments between Washington and Beijing.

U.S. Markets Overview: Treasurys chart

US 3-MOU.S. 3 Month Treasury1.7230.0130.00
US 1-YRU.S. 1 Year Treasury1.6560.0550.00
US 2-YRU.S. 2 Year Treasury1.4640.0660.00
US 5-YRU.S. 5 Year Treasury1.3910.0620.00
US 10-YRU.S. 10 Year Treasury1.5580.0440.00
US 30-YRU.S. 30 Year Treasury2.050.0360.00
At around 2:30 p.m. ET, the yield on the benchmark 10-year Treasury note traded at 1.55%, up about 4 basis points from Friday’s session close. The 30-year bond yield rose to 2.05%. Yields move inversely to prices.
“The discussions with China and the U.S. are a critical component of what drives the market from here,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities. “In 2019, the theme has been about global trade.”
“The markets seem fairly comfortable heading into the meeting, but I think we will need to see real progress and not just jawboning ... to actually move the global economy forward,” Faranello said.
The moves come after a report suggested Chinese officials were increasingly reluctant to agree to a broad trade deal pursued by President Donald Trump.
Trade talks between the U.S. and China are set to resume in Washington, D.C., on Thursday. Vice Premier Liu He, who will lead negotiations for China, told dignitaries that his offer to the U.S. will not include commitments on reforming Chinese industrial policy or government subsidies, Bloomberg reported Sunday, citing sources familiar with the matter.
“We do not have high expectations for the meeting,” Seth Carpenter, chief U.S. economist at UBS, said in a note. “There is some possibility of a so called ‘skinny deal.’”
“Such a skinny deal, however, would do little to change the qualitative path of our forecast,” Carpenter said. “We would still forecast a substantial slowdown in 2020H1. A larger deal is of course possible but remains very low probability. Substantive issues remain between the US and China.”
The world’s two largest economies have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets and souring business and consumer sentiment.
A flurry of disappointing U.S. economic data last week suggested the ongoing trade war was starting to take its toll, stoking concerns of a possible recession. However, the U.S. employment rate dropped to its lowest level in nearly 50 years on Friday, easing concerns of a slowdown.
The jobless rate dipped 0.2 percentage points to 3.5% in September, the Labor Department reported, matching a level it last saw in December 1969.

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