Treasury yields slide after Trump casts doubt on trade deal

U.S. Treasury prices rose early Wednesday, pushing yields lower, after resurfacing fears around a Trump trade deal weighed on equities, stoking appetite for government bonds.

What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -0.87% slipped 2.8 basis points to 2.092%, while the 2-year note rate TMUBMUSD02Y, +0.24% was down 1.2 basis points to 1.850%. The 30-year bond yield TMUBMUSD30Y, -0.63% fell 2.4 basis points to 2.608%. Debt prices move in the opposite direction of yields.

What’s driving Treasurys?
Investor sentiment in risk assets struggled to rebound amid trade policy concerns, following President Donald Trump’s remarks on Tuesday saying he could raise tariffs on China if he wanted.

European and Asian equities were mixed. Futures for the S&P 500 ESU19, -0.02% and the Dow Jones Industrial Average YMU19, -0.11% were trading slightly higher after Tuesday’s fall.

In economic data, housing starts for June will be released at 8:30 a.m. Eastern.

As for the Federal Reserve, Kansas City Fed President Esther George will speak at 12:30 p.m. The U.S. central bank will also release its Beige Book at 2 p.m., a snapshot of business conditions around the country.

China’s holding of Treasurys fell by $2.8 billion in May to $1.11 trillion, a two-year low, even as Japan raised its holdings by $37 billion to 1.10 trillion, according to the Treasury International Capitol report.

What did market participants’ say?
“U.S. equities are struggling for direction as investors weigh President Trump’s latest tariff threat to China, Fed chair Powell’s dovish reiterations, and a mix bag of earnings results,” wrote Edward Moya, senior market analyst for Oanda.

“Trump’s comments are likely to be political posturing that is aimed at putting more pressure on coming through on their promise to make more purchase of US agricultural products,” said Moya.

MarketWatch

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya