Treasury prices rose, pushing yields lower, early Friday trade as geopolitical concerns, including those centered on global trade and Italian politics, stoked appetite for assets considered havens like U.S. government paper.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -1.45% was down 1.8 basis points at 3.091%. The 2-year note yield TMUBMUSD02Y, -0.94% fell 2 basis points to 2.553%, while the 30-year bond rate TMUBMUSD30Y, -0.94% edged lower by 1.2 basis points to 3.235%.
Bond prices move in the opposite direction of yields.
What’s driving the market?
Lingering trade concerns fed appetite for haven assets like U.S. government bonds. U.S. trade representative Robert Lighthizer said the U.S. was “nowhere near” a deal on the North American Free Trade Agreement. Missing the deadline for submitting a revamped agreement to Congress, this should keep the current Nafta agreement in place while diminishing hopes for an early resolution to the protracted uncertainty around a future trade deal.
Chinese officials disputed reports that they had offered the U.S. a $200 billion cut to its trade deficit. This comes as China and the U.S. hold weeklong trade talks to avert a trade conflict, but investors remain downcast on a successful conclusion to the talks. President Donald Trump said Thursday Beijing had become “spoiled” and that he did not expect much to come out of the negotiations.
Beyond concerns about trade, Italian bonds remained under pressure after the 5 Star Movement and the League, two antiestablishment parties seeking to form a governing coalition, agreed on a common government program to slash taxes and boost welfare spending.
See: ‘Nowhere near’ close to Nafta deal, U.S. negotiator says
Read: China disputes reports it offered U.S. $200 billion trade cut
What did market participants say?
“The prospect that a Nafta deal is not on the table and the news that China is not offering $200 billion concessions are helping resolve some of the weakness in Treasury markets,” said Aaron Kohli, fixed-income strategist at BMO Capital Markets.
“May 17 was a hard deadline for completing a new Nafta agreement and submitting it to Congress—that was not just a negotiating point. The Nafta renegotiation is not necessarily dead. However, this Congress—Speaker Ryan’s Republican-majority Congress—will not get to consider a new agreement. Nafta as it presently exists will remain in force for now,” said Carl Weinberg, chief economist for High Frequency Economics.
What are other assets doing?
The 10-year German government bond yield TMBMKDE-10Y, -8.78% was down 2.8 basis points to 0.609%, according to Tradeweb data. German debt is a proxy for the eurozone bond market.
The Italian 10-year government bond yield TMBMKIT-10Y, +4.97% picked up 8.0 basis points to 2.216%.