U.S. Government Bonds Rally on Trade Concerns -- Update
November 18 2019 - 5:40PM
Dow Jones News
By Sam Goldfarb
U.S. government bonds strengthened Monday after a news report
suggested that Chinese officials are pessimistic about reaching a
trade deal with the U.S.
The yield on the benchmark 10-year U.S. Treasury note settled at
1.808%, according to Tradeweb, compared with 1.833% Friday.
Yields, which fall when bond prices rise, drifted higher
overnight but fell immediately after a CNBC reporter tweeted that a
Chinese government official had expressed concerns about trade
talks with the U.S.
The market's quick response showed how sensitive it is to
investors' perception of trade negotiations.
"Treasurys continue to react a whole lot more to information
regarding trade than they do to any sort of developments regarding
the fundamentals of the U.S. economy," said Michael Lorizio, senior
trader at Manulife Investment Management.
Though still higher than the sub-1.5% levels it reached during
the summer, the 10-year yield has been declining since it closed at
1.930% on Nov. 8. While the U.S. and China have been working toward
a "phase one" trade deal, negotiations have hit a snag recently
over issues such as China's willingness to buy specific amounts of
U.S. agricultural goods.
Meanwhile, soft manufacturing data has continued to point to a
slowdown in U.S. economic growth. Last week, the models run by the
Federal Reserve Bank of Atlanta and Federal Reserve Bank of New
York both lowered their forecasts of fourth-quarter gross domestic
product growth to just above zero percent.
The Atlanta Fed's model is now predicting growth of just 0.3%,
while the New York Fed's model is forecasting 0.4% growth.
Slower growth tends to drag down Treasurys yields by bolstering
demand for safer assets. It also can depress expectations for
inflation, which is a main threat to longer-term government bonds
because it erodes the purchasing power of their fixed payments.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
November 18, 2019 17:25 ET (22:25 GMT)
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