U.S. government bond rates retreat as investors await Trump-Juncker summit, 5-year auction

U.S. government bond yields slipped on Wednesday as fixed-income investors watched for the latest developments between Washington and its international trade partners and as investors awaited an auction of bonds due later in the session.

The 10-year Treasury note yield TMUBMUSD10Y, -0.13% fell 1.2 basis points to 2.937%, the 30-year bond TMUBMUSD30Y, -0.23% gave up 1.6 basis points at 3.061%. Meanwhile, the 2-year note yield TMUBMUSD02Y, -0.30% edged back by 0.4 basis point to 2.641%, hanging around its highest yield since 2008.

Bond investors have seen mostly muted moves with the exception of Monday’s selloff. It was prompted partly by concerns about shifts in global monetary policy that may be bearish for bonds, a factor that helped to push global yields up. Reports by the Wall Street Journal, and others, that the Bank of Japan could tweak its policies has been widely attributed as one of the factors that prompted sharp moves in debt markets, pushing yields higher in the U.S. and other developed markets. Before that, U.S. government debt had been caught in a mostly narrow trading band.

Many traders have expressed doubts about speculation that the BOJ, which meets for its policy update on July 30-31, would abandon its efforts to lift stubbornly low inflation that has hung below the central bank’s 2% target.

“The price is completely set by the BOJ. And yeah, while it is tempting to believe the Bank of Japan would like to see the bond market relieved of their manipulations, that’s a pipe dream,” argues financial blogger Kevin Muir of the Macro Tourist, in a Tuesday note.

On Wednesday, investors may fixate on a key trade-related meeting between President Donald Trump and European Union President Jean-Claude Juncker, which could help to ease, or exacerbate, tensions tied to imposing import tariffs that investors have feared could morph into a full-scale trade war. On Tuesday, Trump tweeted that “Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs,” raising some fears that disputes between China, Europe and North America may not be nearing an end.

“Today’s focus will be the EU Commission President Juncker’s meeting with Trump at 1:30 p.m. [Eastern Time] in Washington to discuss trade tariffs,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, in a Wednesday research note.

Later in the day, market participants are awaiting an auction of 5-year Treasury notes set for 1 p.m.