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U.S. Treasury yields rose early Friday, as stocks rallied, amid hopes that the European Union was inching forward to a fiscal stimulus package that could limit the economic devastation wrought by the COVID-19 pandemic while China was reported to be buying more American agricultural products.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.735% rose 2.9 basis points to 0.723%, while the 2-year note rate TMUBMUSD02Y, 0.201% was virtually unchanged at 0.194%. The 30-year bond yield TMUBMUSD30Y, 1.517% climbed 4.1 basis points to 1.502%.
What’s driving Treasurys?
European Central Bank President Christine Lagarde warned EU leaders to move forward with a recovery plan or risk a turn in market sentiment, lifted by hopes that European government would agree on a fiscal stimulus package for the 27-member economic bloc. The EU council are meeting on Friday to discuss the recovery package, though few expect an agreement to be reached this week.
Futures for the S&P 500 SPX, +0.05% and Dow Jones Industrial Average DJIA, -0.15% point to a higher start for U.S. equities, easing demand for haven assets like government bonds.
Also buoying risk assets, U.S. Secretary of State Michael Pompeo said China’s high-ranking foreign policy official Yang Jiechi had agreed to honor all the commitments made under the phase one deal. His comments come as analysts note China’s buying of farm goods are on pace to fall short of its promised amount.
Still, tensions between the two countries continue to rattle investors amid worries that both the Trump administration and the Democrat Presidential candidate Joe Biden will take a tough stance on China.
What did market participants’ say?
“European leaders seem to have enough pressure to sway the fiscally hawkish nations into agreeing on the proposed 750-billion-euro recovery fund. The southern periphery needs critical support for their economic recovery and if negotiations do not have a relatively smooth path, the euro could quickly erase a majority of its June gains,” wrote Edward Moya, senior market analyst at OANDA.
