U.S. Government Bonds Rally on Trade Concerns -- Update

Date : 11/18/2019 @ 10:40PM
Source : Dow Jones News

U.S. Government Bonds Rally on Trade Concerns -- Update

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)

Copyright (c) 2019 Dow Jones & Company, Inc.

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