BOND REPORT: U.S. Government Bond Yields Edge Lower As China-U.S. Trade Tensions Remain In Focus
June 18 2018 - 8:15AM
Dow Jones News
By Mark DeCambre, MarketWatch
U.S. government bond yields edged slightly lower early Monday as
escalating tensions between Washington and Beijing drove a flight
to the perceived safety of Treasurys, which have pushed rates
down.
President Donald Trump approved tariffs of 25% on about $50
billion of Chinese goods on Friday
(http://www.marketwatch.com/story/escalating-us-china-trade-spat-comes-at-a-bad-time-for-global-growth-economist-says-2018-06-15),
drawing retaliatory measures by China on U.S. goods of the same
value.
Trade jitters also saw the futures for the Dow Jones Industrial
Average and the S&P 500 index firmly lower early Monday, with
Dow futures showing a triple-digit point drop
(http://www.marketwatch.com/story/dow-futures-fall-more-than-100-points-as-trade-worries-persist-2018-06-18).
Elevated trade tensions come after a string of central bank
gatherings last week, highlighted by the Federal Reserve's second
rate increase in 2018
(http://www.marketwatch.com/story/fed-hikes-interest-rates-now-sees-4-moves-this-year-2018-06-13),
and its signaling of a more aggressive rate-hike path than had been
expected for the remainder of the year, while the European Central
Bank announced the eventual unwind of its massive bond-buying
program
(http://www.marketwatch.com/story/ecb-aims-to-end-bond-buying-program-by-end-of-2018-2018-06-14),
albeit, at a slower pace than many on Wall Street had expected.
The 10-year Treasury note yield fell 1.5 basis points to 2.911%,
while the 30-year bond yield edged 1.1 basis points lower to
3.037%.
The two-year note yield fell 1.2 basis points to 2.545%.
Bond prices move in the opposite direction of yields.
Meanwhile, a measure of the yield curve, the differential
between two-year and 10-year Treasurys, stood at 36.6 basis points,
or 0.366 percentage point, holding at the tightest spread since
around 2007.
Another measure of that gap, the difference between the 5-year
Treasury note at 2.789%, and the 30-year bond, stood at 24.8 basis
points or 0.248 percentage point, also hanging around its tightest
in 11 years.
The yield curve, which reflects the rate gap across all Treasury
maturities and tends to slope higher because investors generally
demand richer yields for lending for a longer period, has been an
accurate predictor of recessions.
Jeff deGraaf, chairman of Reinaissance Macro Research, in a
Monday research note said weekly reports from the Commodity Futures
Trading Commission indicate that appetite for bonds is strong,
implying that yields will contract further.
"Positioning data out of the CFTC shows a relatively low level
of net-long positioning by large speculators," he wrote. The
technical analyst said recent readings are "mildly supportive to
better returns over the next 3-months for bonds (lower
yields)."
Looking ahead, traders are awaiting a June reading for a U.S.
housing market that is slated to be released at 10 a.m. Eastern
Time.
Check out:MarketWatch's Economic Calendar
(http://www.marketwatch.com/economy-politics/calendars/economic)
On the Federal Reserve front, incoming New York Fed President
John Williams is due to speak in New York at 4 p.m. Eastern at a
conference focused on reforming behavior in financial services.
(END) Dow Jones Newswires
June 18, 2018 08:00 ET (12:00 GMT)
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