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U.S. Treasury yields fell Wednesday after investors suggested a U.S. Senate Bill supporting Hong Kong protesters could undermine progress towards a phase one trade deal between Washington and Beijing, spurring inflows into government paper.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -2.16% fell 3.4 basis points to 1.752%, while the 2-year note rate TMUBMUSD02Y, -1.28% was down a basis point to 1.586%. The 30-year bond yield TMUBMUSD30Y, -1.61% slipped 3.6 basis points to 2.220%.
What’s driving Treasurys?
The Senate passed a bill that would require the U.S. Secretary of State to certify every year that Hong Kong was sufficiently independent from Beijing, and would also ban the export of U.S.-made crowd control equipment to Hong Kong. The bill will now proceed to the House, which already passed its own version of the bill in October. In response, China accused the U.S. of interfering in its domestic affairs, according to Chinese foreign ministry spokesperson Geng Shuang.
Trade talks between the U.S. and China are in danger of hitting an impasse, threatening to derail the Trump administration’s plan for a limited “phase-one” pact this year, according to the Wall Street Journal, citing former administration officials and others.
Both sides remain divided over core issues—including Beijing’s demand for removing tariffs and the U.S.’s insistence on China buying farm products—nearly six weeks after an “agreement in principle” was announced by the White House on Oct. 11.
Stock-market futures for the S&P 500 SPX, -0.06% and the Dow Jones Industrial Average DJIA, -0.36% showed U.S. equities were seen opening lower on Wall Street.
What did market participants’ say?
“Investors are coming round the view that the inertia between the U.S. and China is not going to be solved anytime soon notwithstanding the protestations by U.S. officials that a deal is close,” wrote Kenneth Broux, a strategist at Société Générale. “One wonders if US Senate backing for protesters in [Hong Kong] has effectively reduced the chances of a deal to zero.”
