Treasury yields resumed a climb hon Wednesday as fretting about the threat of an economically disruptive trade war between the U.S. and China subsided, and took a back seat to the concerns about rising interest rates and coming labor-market data, which could inform the Federal Reserve’s policy agenda.
How are Treasurys performing?
The 10-year Treasury note yield TMUBMUSD10Y, +0.32% climbed 3.4 basis points to 2.822%, while the 30-year bond rate TMUBMUSD30Y, +0.66% advanced 3 basis points to 3.059%, after scraping an intraday low of 2.989% in the previous session. The 2-year note yield TMUBMUSD02Y, +0.71% the most sensitive to the monetary policy outlook, was mostly rose 1.1 basis points at 2.299%.
Bond prices fall as yields rise.
What’s driving the market?
Global equity markets were on the rise, with the Dow Jones Industrial Average DJIA, +0.96% and the S&P 500 index SPX, +1.16% set to open with modest gains, helping to consolidate a dramatic recovery for risk assets on Wednesday, amid signs that President Donald Trump’s administration’s trade standoff with the world’s second-largest economy, China, may yet be resolved without an all-out trade war that could hurt both economic powers and the global economy.
Read: Here’s how the China-U.S. ‘trade skirmish’ could become a global ‘trade war’
China’s plans to impose retaliatory duties on 106 categories of U.S. products were blamed for much of the Wednesday’s turmoil, which saw the Dow selloff by as many as 510 points intraday on Wednesday before roaring back to end with a gain of 1%.
A respite in volatility has given way to focus on the coming nonfarm-payrolls report due on Friday, which will be pored over for signs of inflation, which could add to the rise for Treasury yields. Rising inflation can chip away at a bond’s purchasing power and can compel the Fed to hike rates more rapidly, both factors that are bearish for bonds, driving prices lower and elevating rates.
What data and Fed speakers are ahead?
At 8:30 a.m. Eastern Time investors will focus on data on weekly jobless claims and the February trade deficit.
Atlanta Fed President Raphael Bostic is scheduled to speak at University of South Florida Sarasota-Manatee at 1 p.m.
On Friday, economists expect March employment growth to come in at a slower pace, after a strong start to 2018.
What are strategists saying?
“Strong growth at the start of the year provoked worries over rising inflation. Yet, the recent data moderation has meant that these concerns have quickly given way to worries about a lack of inflation—and thus ‘Quantitative Failure,’” according to Bank of America Merrill Lynch credit strategist Souheir Asba, in a Thursday note.
Concerns early this year about a revival of previously dormant inflation pressures helped to take the 10-year Treasury yield to an intrasession peak at 2.949% on Feb. 22. Those concerns have since ebbed but investors continue to grow anxious about rising prices and the ability of global central banker’s to end a regime of ultralow rates without unsettling global economic growth, Asba said.
Read: JPMorgan’s Dimon: Investors underestimate threat of ‘drastic action’ by Fed, other central banks
Which other assets are in focus?
The yield for the 10-year German note TMBMKDE-10Y, +3.54% known as the bund, and often viewed as a proxy for the health of the eurozone economy, was up at 0.519%, compared with 0.492% the previous session.
European stock markets were showing sharp gains.