U.S. Treasury prices rose on Tuesday, pushing yields lower, after a consumer confidence indicator sagged, suggesting the bedrock of the U.S. expansion may be developing cracks under the pressure of global growth worries and continuing trade tensions.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -4.45% retreated 6.6 basis points to 1.642%, while the 2-year note yield TMUBMUSD02Y, -4.62% fell 5.8 basis points to 1.611%, while the 30-year bond yield TMUBMUSD30Y, -3.20% slipped 5.4 basis points to 2.099%.
What’s driving Treasurys?
In U.S. economic data, the September U.S. Conference Board’s consumer confidence index slipped to 125.1, a three month low, from 133.3, as escalating trade tensions with China undermined confidence, underscoring the dangers of a conflict that has harmed key business sectors such as manufacturing and farming and poses a threat to the longest U.S. economic expansion since World War II. Economists surveyed by MarketWatch has forecast a 131.1 reading.
The sudden drop amplified market jitters around the health of the consumer. Households have helped the U.S. economy weather the consequences of the U.S.-China trade war, including a decline in business investment and weakness in manufacturing.
The U.S. S&P Case Shiller home-price index for July rose 2% year-on-hear in July, the slowest pace of home price apprecation since 2012.
The bullish momentum in the bond-market gained impetus after House speaker Nancy Pelosi said she would make an announcement in the afternoon, raising concerns that she may endorse impeachment proceedings against President Donald Trump.
Investors cited rising odds for Trump’s impeachment as the President confirmed that he had withheld military aid to Ukraine. Trump, however, denied that had kept back the funds to pressure Ukraine into investigating former Vice President Joe Biden and his son Hunter Biden.
Stocks accelerated their selloff on the impeachment speculation. The S&P 500 SPX, -1.11% and the Dow Jones Industrial Average DJIA, -0.88% traded lower on Tuesday.
What did market participants’ say?
”Net, net, consumer confidence plunged in September which counts as a big surprise that may sidetrack the economic expansion that is relying on consumer spending to fuel growth. The upshot is that the consumer isn’t as brave as we thought and they are now starting to have real worries about where their futures lie. This unwelcome news on souring consumer spirits is a startling new development that could even bring more rate cuts later this year from the Federal Reserve,” said Chris Rupkey, chief financial economist for MUFG, in a Tuesday note.
“It is possible that intensification of talks about a Congressional effort to impeach President Trump sparked a flight-to-quality,” wrote Thomas Simons, senior money market economist at Jefferies.
What else is on investors’ radar?
Elsewhere, the U.K. Supreme Court ruled that U.K. Prime Minister Boris Johnson’s move to temporarily suspend Parliament was void. Analysts say Johnson was attempting to circumvent the British legislature to push for Brexit before the Oct. 31 deadline. The ruling could make it more difficult for the U.K. to crash out of the European Union without a trade deal in hand.
The 10-year British government bond yield TMBMKGB-10Y, -3.71% was down a single basis point to 0.525%.
See: U.K. Supreme Court rules prorogation was unlawful
Investors also saw some fresh debt supply. The Treasury Department’s auction for $40 billion of 2-year notes drew brisk bidding. The share of indirect bidders, a proxy for overseas demand, was the highest since January 2018.