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U.S. Treasury yields fell Friday as investors contended with escalating tensions between Washington and Beijing amid the COVID-19 pandemic, drawing appetite for haven assets.
The U.S. bond-market will be closed next Monday in observance of the Memorial Day holiday.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.660% fell 1.8 basis points to 0.659%, trimming its weekly drop to 1.9 basis points, while the 2-year note rate TMUBMUSD02Y, 0.173% was virtually unchanged at 0.168%, leaving it up 1.9 basis points for the week.
The 30-year bond yield TMUBMUSD30Y, 1.374% slipped 2.6 basis points to 1.373%, paring back its weekly increase to 5.3 basis points. Bond prices move inversely to yields.
What’s driving Treasurys?
Bonds rallied and global stock markets were under pressure as geopolitical risks came to the fore.
Given the uncertainty created by the coronavirus pandemic, China dropped its GDP target for the first time since adopting the practice in 1994, but of more concern officials suggested the government is preparing to impose a national-security law on Hong Kong in response to last year’s pro-democracy protests.
Hong Kong’s Hang Seng index HSI, -5.56% tumbled 5.6% in response, marking its biggest loss in around five years. The S&P 500 SPX, +0.23% and Dow DJIA, -0.03% were range-bound ahead of the holiday weekend.
The U.S. Congress was moving forward with a bill that could prevent Chinese companies from listing on U.S. exchanges. The bill would require Chinese companies to establish they are not owned or controlled by a foreign government.
What did market participants’ say?
“We think quiet markets are bullish markets (ie lower rates). We also count simmering geopolitical risks as an argument skewing rates risks to the downside. Tensions between the U.S. and China over Hong Kong are the latest source of worries,” said rates strategists at ING, in a note.
