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U.S. Treasury yields edged higher early Wednesday as investors looked past reports that the Trump administration was weighing imposing import tariffs on the European Union and Canada along with more evidence of rising coronavirus case in many American states.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.725% rose 0.8 basis point to 0.717%, while the 2-year note rate TMUBMUSD02Y, 0.195% was virtually flat at 0.192%. The 30-year bond yield TMUBMUSD30Y, 1.500% edged 0.3 basis point higher to 1.492%.
What’s driving Treasurys?
The U.S. was considering placing tariffs on the EU over a trade spat involving Europe’s Airbus and its U.S. counterpart Boeing, according to a notice by the Office of the U.S. Trade Representative. The move is part of the U.S. response to the most recent ruling in the very long-running dispute at the World Trade Organization on aircraft subsidies.
Rising trade tensions and concerns about the spread of the coronavirus pandemic in the U.S. undermined stock prices. Dow YM00, -0.69% and S&P 500 futures ES00, -0.51% are pointing to a lower open for Wall Street on Wednesday.
Investors will digest a record large $47 billion of U.S. Treasury 5-year notes for sale at 1 p.m. ET. So far, bond buyers have had little trouble taking down the larger debt auctions as the Federal Reserve signals its intentions to keep interest rates low for a prolonged period and continue its bond buying.
The International Monetary Fund will release its World Economic Outlook on Wednesday, giving an update of its forecasts for the global economy as countries reel from one of the biggest hits to growth in history.
In economic data, business confidence in Germany, the eurozone’s largest economy, recorded its largest rise ever in June, the IFO institute said. They expected Germany to return to growth in the third quarter.
What did market participants’ say?
“It would likely take another full day of wobbly stock prices before U.S. Treasury yields respond to an uptick in [volatility],” said Jim Vogel, an interest-rate strategist at FHN Financial. “Inflation expectations are now rising exponentially regardless of economic, pandemic, or market news, and that raises the bar for bond prices to mount a rally.”
