Treasury prices grinded lower Tuesday, pushing up yields, as U.S. stocks rebounded, unwinding haven-relating buying of government debt after a tech-led rout at the start of the week.
What are yields doing?
The yield on the benchmark 10-year Treasury note TMUBMUSD10Y, +1.86% climbed 5.3 basis points to 2.784%, the biggest one-day yield climb since Feb. 14, snapping a fourth straight session of falling yields, according to WSJ Market Data Group.
The 2-year note yield TMUBMUSD02Y, +2.16% rose 4.2 basis points to 2.286%, its largest one-day yield gain since Feb. 21. The yield on the 30-year Treasury bond TMUBMUSD30Y, +1.69% known as the long bond, was up 4.7 basis points at 3.017%, also its largest one-day yield gain since Feb. 21.
Yields and debt prices move in opposite directions.
What’s driving the market?
A sharp stock-market selloff on Monday prompted buying of Treasurys, pushing the yield on the 10-year note to its lowest since Jan. 31. Escalating trade tensions with China and President Donald Trump’s criticisms of tech giant Amazon.com Inc. AMZN, +1.46% were blamed for the broad decline.
But with stocks rebounding swiftly on Tuesday, dissipating the earlier flight to safety, bond yields rose to follow the path of least resistance. Investors still cite a combination of concerns ranging from widening budget deficits to rising inflation to a Federal Reserve unwilling to shift from its inexorable rate hike trajectory.
See: Will Treasurys’ wobbly first quarter set the stage for the market to get flattened?
The U.S. equity market saw broad gains. The S&P 500 SPX, +1.26% Dow Jones Industrial Average DJIA, +1.65% and the Nasdaq Composite COMP, +1.04% all rose more than 1% for the day.
What are analysts saying?
“Fragile risk sentiment will remain the driving market force ahead key U.S. [economic] data/events later this week. There’s no reason to row against the current tide, suggesting more gains for core bonds, while the impact on FX markets will be more subdued,” wrote analysts at KBC Bank in Brussels.
“Given the equity market volatility and drawdown, one would have been forgiven for assuming that the 10-year yield would be at least 25 basis points lower right now, but alas, such is not the case. A Fed that is not at all dovish, looming large fiscal deficits, and late-cycle inflationary pressures appear to be getting in the way, at least for the time being,” said Dave Rosenberg, chief economist for Gluskin & Sheff.
Which data are in focus?
No major data was released on Tuesday. The March labor report is due on Friday, with investors set to again pay close heed to the wages component for strength that could lead to a pickup in inflation.
See: MarketWatch Economic Calendar
Wednesday will bring ADP’s estimate of private-sector payroll activity in March, as well as ISM’s March nonmanufacturing index, February factory orders data and the minutes of the March meeting of Federal Reserve policy makers, which delivered a quarter-point rate increase.