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U.S. Treasury yields slip as early equity slide bolsters bonds

U.S. Treasury yields slipped in early Tuesday’s trade, pulling back from their overnight highs as bonds followed a slide in stocks.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 1.579% was down 1.6 basis points to 1.590%, after running as high as 1.625%, while the 2-year note rate TMUBMUSD02Y, 0.160% was steady at 0.164%. The 30-year bond yield TMUBMUSD30Y, 2.253% slid 1.7 basis points to 2.270%.

What’s driving Treasurys?

The weakness in U.S. equities early Tuesday fueled bidding in haven assets such as government bonds. It wasn’t clear what the trigger for the sudden dip in risk sentiment, but investors cited geopolitical tensions between China and its Asian neighbors around the South China Sea for some of the market jitters.

The Stoxx Europe 600 SXXP, -1.43% was down 0.8%, while S&P 500 ES00, -1.18% and Dow YM00, -0.35% equity futures were pointing to a slide for stocks at the opening bell.

In economic data, the U.S. international trade deficit widened by 5.6% to a record $74.4 billion in March, reflecting the impact of stimulus payments. Though, higher trade gaps can weigh on economic growth, they’re also a reflection of a recovering U.S. economy and free-spending consumers.

In other U.S. data, factory orders for March are due at 10 a.m. ET.

What did market participants say?

“All said and done, globally this reopening has been extremely uneven. And we continue to see the Fed looking for crutches to stay on the side of dovishness,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.

“In general, we view this sideways price action since the aggressive repricing in the first quarter of 2021 as a natural consolidation period following the speed and velocity in which we repriced in February,” said Faranello.

By: Sunny Oh

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