U.S. Treasury yields fell Thursday after optimism waned around the U.K.’s tentative agreement to leave the European Union, amid questions of how it will get approved in a divided British Parliament on Saturday.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -0.35% was down 0.9 basis points to 1.736%, while the 2-year note rate TMUBMUSD02Y, -0.25% was unchanged at 1.586%. The 30-year bond yield TMUBMUSD30Y, -0.02% fell 1.1 basis points to 2.221%.
What’s driving Treasurys?
The earlier selloff in bond markets faded after stocks lost their momentum after analysts said there remained substantial obstacles before the Brexit agreement is ratified. It is unclear if U.K. Prime Minister Boris Johnson’s proposal will be approved by Parliament under the opposition from Northern Ireland’s Democratic Unionist Party.
See: What a Brexit deal would mean for U.S. stocks and global investors
Johnson had announced the U.K. and European negotiators had managed to strike a tentative Brexit deal, with European Commission President Jean-Claude Juncker saying it was a “fair and balanced agreement.” Investors said the breakthrough lowered the chance of the U.K. leaving the EU without a trade deal in hand.
The U.K. 10-year government bond yield was up 0.9 basis point to 0.702%, Tradeweb data show.
The Dow Jones Industrial Average DJIA, +0.04% and the S&P 500 index SPX, +0.26% were teetering near break-even levels.
Investors handled a raft of U.S. economic data in the morning. The Philadelphia Fed manufacturing index fell to 5.6 in October, after hitting 12 in September. Housing starts slumped 9.4% in September to an annual pace of 1.26 million, while home-builder permits dropped 2.7% last month to a pace of 1.38 million.
Industrial production fell 0.4% in September, the largest one-month drop since April, and below the 0.2% expected by economists, according to a MarketWatch survey.
See: Here’s what has been agreed between the EU and the U.K. on Brexit
Several Federal Reserve officials could also give clues to the outlook for another rate cut before the end of the year. Fed Gov. Michelle Bowman is due to speak at 2 p.m., and New York Fed President John Williams at 4:20 p.m.
What did market participants’ say?
“A Brexit deal could still have considerable headwinds within U.K. Parliament. Headline risk will certainly be front and center,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.
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