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U.S. Treasury yields stood steady on Friday as investor worries around worsening relations between the world’s two largest economies was offset by signs that the eurozone economic recovery remained on track.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.592% edged up 0.2 basis point to 0.584%, while the 2-year note rate TMUBMUSD02Y, 0.145% was flat at 0.149%. The 30-year bond yield TMUBMUSD30Y, 1.254% fell 1.3 basis points to 1.236%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
Tensions between the U.S. and China heated up as Beijing ordered the closure of the U.S. consulate in Chengdu, retaliating against Washington’s move to close the Chinese consulate in Houston. On Thursday, Secretary of State Mike Pompeo called on governments around the world to join the U.S. in confronting China’s Communist Party leaders.
Futures for the S&P 500 SPX, -1.23% stock index and Dow Jones Industrial Average DJIA, -1.30% were trending lower early Friday, bolstering prices for government bonds overnight but the rally lost momentum after a round of positive economic data from Europe.
The eurozone flash purchasing managers indexes rebounded sharply in June, with the eurozone manufacturing PMI rising to 51.1 from 47.4 and the services PMI jumping to 55.1 from 48.3. Any reading above 50 indicates improving economic conditions.
The 10-year German government bond rate TMBMKDE-10Y, -0.442% rose 2.6 basis points to negative 0.46%, while the equivalent Italian 10-year yield TMBMKIT-10Y, 1.027% rose 3.6 basis points to 1.02%.
In U.S. economic data, new home sales for June are set to arrive at 10 a.m. ET. MarketWatch-polled analysts are forecasting an annualized reading of 710,000.
What did market participants’ say?
“We expect geopolitical tensions to escalate between the U.S. and China over the coming weeks and months especially as the U.S. Presidential election nears,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, in a note.
