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U.S. Treasury yields edged up early Tuesday’s trade as a raft of European economic surveys showed the damage wrought by the COVID-19 pandemic on the eurozone may be easing.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.725% was up 2.6 basis points to 0.730%, while the 2-year note TMUBMUSD02Y, 0.193% rate edged 0.4 basis point higher to 0.196%. The 30-year bond yield TMUBMUSD30Y, 1.494% climbed 3.9 basis points to 1.501%. Bond prices move inversely to yields.
What’s driving Treasurys?
Signs that the battered eurozone economy was stabilizing helped to weigh on bond prices but the benchmark 10-year U.S. Treasury note yield remains in its range of the past 10 days. The flash eurozone composite purchasing managers index rose to a 4-month high of 47.5 in June from 31.9 in May, IHS Markit said Tuesday, though the figure was still below the 50-mark indicating deteriorating conditions.
While in the U.S., the June Markit purchasing managers survey is due at 9:45 a.m. ET, followed by May new home sales at 10 a.m.
Bond traders were taken by surprise overnight after White House adviser Peter Navarro said the trade deal was “over,” but later walked back his comments, saying they had been taken out of context. President Trump later said the phase one trade deal with China remained intact.
Opinion: ‘Wildly out of context’ — Navarro on his own words, and the markets in relation to the economy
Investors will also await a bond auction for $46 billion of 2-year notes on Tuesday. An influx of debt supply can push yields higher ahead of bond auction.
But the Federal Reserve’s commitment to holding interest rates low for an extended period has helped to anchor short-dated yields, keeping the 2-year note rate at around 0.20% since early April.
What did market participants’ say?
“While Mr Navarro’s comments to Fox News overnight were reportedly taken ‘wildly out of context’, it does leave one wondering if there is no smoke without fire and, as such, we would suggest this acts as a reminder that the likely boost to sentiment from a further easing of global lockdowns will be at risk from an anticipated rise in geopolitical tensions in the virus’ wake,” said interest-rate strategists at Rabobank, in a note.
