Treasury Yields Rise Along with Global Rates as Brexit Deal Hopes Increase
U.S. government debt prices fell on Tuesday, erasing earlier gains, as investors ditched safe havens in favor of riskier assets amid increasing hopes for a Brexit deal.
The benchmark 10-year Treasury yield rose to 1.75% while the 2-year yield climbed to 1.61%. Yields move inversely to prices. The U.S. bond market was closed Monday due to Columbus Day.
Bloomberg News reported negotiations between the European Union and the UK were closing in on a draft deal for the UK’s departure from the EU. The report sent 10-year UK Gilt yields shooting higher to 0.716%. The 10-year German bund yield also pared losses to trade at negative 0.42%.
Earlier on Tuesday, EU negotiator Michel Barnier said a Brexit deal “was still possible this week,” but noted that “any agreement must work for everyone.”
|US 3-MO||U.S. 3 Month Treasury||0.106||-0.003||0.00|
|US 1-YR||U.S. 1 Year Treasury||0.178||0.005||0.00|
|US 2-YR||U.S. 2 Year Treasury||0.222||0.003||0.00|
|US 5-YR||U.S. 5 Year Treasury||0.364||-0.005||0.00|
|US 10-YR||U.S. 10 Year Treasury||0.59||-0.021||0.00|
|US 30-YR||U.S. 30 Year Treasury||1.17||-0.033||0.00|
U.S. rates had dipped earlier in the session as worries around U.S.-China trade relations percolated.
President Donald Trump announced Friday that China and the U.S. agreed to the first phase of a broader trade deal between the two nations. As part of phase one, China would increase U.S. agricultural purchases and take steps to address intellectual-property theft. In return, the U.S. would halt a tariff hike slated for this week.
Markets cheered the news last week, but it would be short-lived. China trade front. CNBC learned through a source that China wants to have additional talks before signing phase one of a trade deal with the U.S. Treasury Secretary Steven Mnuchin also said Monday another tariff hike scheduled for December would go through if a deal was not reached.
“There is simply nothing clear right now,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities, in a note. “One day we have a substantial “phase 1” deal with China, the next the Chinese need more meetings as Mnuchin indicated it’s all about the paperwork with more meetings in the coming weeks.
The ongoing trade war between China and the U.S. has dampened expectations of economic growth. The International Monetary Fund (IMF) said Tuesday the conflict will drive global growth down to its lowest level since the financial crisis, adding that outlook could worsen if there is no resolution.
Investors got a small piece of positive economic news on Tuesday, however. The Empire State manufacturing index rose to 4 in October from 2 in September. That’s also better than a Dow Jones estimate of 0.8. Still, manufacturing activity remains subdued at current levels.
By: Fred Imbert and Sam Meredith