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U.S. Treasury yields rose early Tuesday trade in line with the positive tone in risky asset markets, following a raft of economic data that showed the recovery in China, the world’s second largest economy, was continuing apace.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.685% rose 1.2 basis points to 0.681%, while the 2-year note rate TMUBMUSD02Y, 0.137% was steady at 0.139%. The 30-year bond yield TMUBMUSD30Y, 1.430% added 2.1 basis points to 1.429%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
Chinese retail sales grew for the first time in 2020, rising 0.5% in August from a year earlier, according to the National Bureau of Statistics. Industrial production in China also rose 5.6%, up from July’s 4.8% increase.
The broad-based improvement in Chinese data helped to alleviate concerns about the world economy’s trajectory in the face of the COVID-19 pandemic. Futures for the U.S. S&P 500 index SPX, +1.27% and Dow Jones Industrial Average DJIA, +1.18% were pointing higher as equities remained on pace to claw back last week’s loses, easing demand for government bonds.
See: China’s economic recovery gained speed in August
Investors will handle plenty of U.S. data Tuesday, too. A September snapshot of manufacturing activity in New York state and an index of August import prices were due at 8:30 a.m. ET. Then, August industrial production data was set for release at 9:15 a.m.
The Federal Reserve’s two-day meeting will kick off later on Tuesday, where investors are hoping to glean clues on how senior central bankers see the path for growth and inflation ahead.
The U.S. Treasury Department will auction off $22 billion of 20-year notes later Tuesday. The sale could weigh on trading for longer-dated debt throughout the session as broker-dealers make room for the incoming bond supply.
What did market participants’ say?
“The strong Chinese data overnight (industrial production and retail sales) helped edge yields higher; as did the looming 20-year auction,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
