Treasury prices rose Monday, pushing yields lower, after investors poured into the perceived safety of government paper, as investors shook off optimism around U.S.-China trade talks and stocks pivoted lower.
The 10-year Treasury note yield TMUBMUSD10Y, +0.03% fell 3.3 basis points to 2.722%. The 2-year note yield TMUBMUSD02Y, +0.00% was down 1.4 basis points to 2.544%, while the 30-year bond yield TMUBMUSD30Y, -0.03% slipped 3.5 points to 3.090%, marking its largest single-day decline since Feb. 7. Bond prices move in the opposite direction of yields.
The Wall Street Journal reported that Washington and Beijing were completing a deal that would see the U.S. cut its tariffs on Chinese imports, at the same time, obligating Beijing to buy American agricultural and energy products. President Donald Trump and Chinese leader Xi Jinping could meet later in March to complete an agreement.
However, some market participants said expectations for a trade deal may be mostly baked in financial markets, and yields had little room to rise further after last week’s selloff when climbing expectations for a U.S.-China trade deal helped to draw away investors from the haven assets like government paper in favor of equities. The yield pullback also gained fresh impetus after the S&P 500 SPX, -0.39% and the Dow Jones Industrial Average DJIA, -0.79% turned lower in the trading session.
“Markets have seemed to have priced a deal in many times over,” wrote Peter Boockvar, chief investment officer for the Bleakley Advisory Group.
On top of that, some traders and strategists attributed bond buying and stock declines Monday to growing skepticism that any trade deal could substantially contribute positively to the waning economic expansion internationally.
“Even if US tariffs on China were rolled back entirely, we doubt it would be enough to prevent the global economy from slowing sharply this year. With this in mind, we think that safe havens will be in demand again before long,” noted Simona Gambarini, markets economist for Capital Economics.
As for the rest of the week, investors will monitor China’s annual legislative session starting on Tuesday, which could give clues on Xi’s policy plans as he tackles the tricky task of limiting the risks around mounting debt levels while preventing growth from sliding too fast.
In Europe, the Greek 10-year government bond yield traded at 3.684%, around its lowest levels since 2006 after Moody’s boosted its credit rating two notches late last week citing the recent progress in the government’s reforms, according to Tradeweb data. Greece said it planned to issue soon its first 10-year bond since 2010.
