Treasury yields fell on Tuesday as traders dealt with headlines around U.S.-China trade tensions and discussions of potential fiscal stimulus options by the White House.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -2.26% fell 3.1 basis points to 1.567%. The 2-year note rate TMUBMUSD02Y, -1.86% was down 1 basis point to 1.527%, while the 30-year bond yield TMUBMUSD30Y, -1.72% slipped 4 basis points to 2.045%. Debt prices move in the opposite direction of yields.
What’s driving Treasurys?
The Washington Post reported that the White House have started looking into potential policy measures to prop up the economy including payroll tax cuts. This comes as President Donald Trump has announced his confidence in the U.S. growth engine despite some signs that the global slowdown is washing up on domestic shores.
Investors hoped for a de-escalation of the U.S.-China trade standoff after Commerce Secretary Wilbur Ross said on Monday his department would extend a reprieve for Huawei Technologies Co. to buy components and supplies from U.S.
The bond market also awaited Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole symposium later in the week.
On Monday, President Donald Trump called for the Fed to implement aggressive rate cuts, of around 1 percentage point from where it currently stands at 2%-2.25%, even as he said that the economy wasn’t on the verge of entering a recession.
The hope among bond-market bulls is Powell will clarify his stance on the need for further rate reductions and will recast his remarks stating that July’s quarter point cut was a “mid-cycle adjustment to policy.”
Traders on the fed-fund futures market have all but priced in another quarter point rate cut at the Fed’s Sep. 18 meeting, according to CME Group data.
Read: Fed’s Rosengren says cutting interest rates now would make next recession worse
What did market participants’ say?
“Markets remain fixated on the Jackson Hole speeches at the end of the week and demand for safer assets will likely remain strong until we have clarity on how the Fed will respond to growing risks to the outlook,” wrote Edward Moya, senior market analyst at Oanda.
What else is on investors’ radar?
The minutes from the Reserve Bank of Australia’s meeting showed members of its rate-setting committee would be willing to ease policy further if necessary. They also discussed expanding the policy tool kit to include “unconventional monetary policy measures” that have been used by other countries after the financial crisis.
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