Treasury yields rose Monday after reports indicated that the U.S. no longer plans to designate China as a currency manipulator, helping dampen the appeal of government debt and propelling major stock indexes to fresh highs.
What are Treasurys doing?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +0.87% rose 3 basis points to 1.855%, while the 2-year Treasury yield TMUBMUSD02Y, +0.77% was up 1.8 basis points to 1.588%. The yield on the 30-year Treasury bond TMUBMUSD30Y, +0.85% gained 3.7 basis points to 2.321%. Yields rise as Treasury prices fall.
What’s driving the market?
Government bond prices fell, raising yields, on Monday following reports that the U.S. plans to lift its designation of China as a currency manipulator, ahead of Wednesday’s expected signing of a partial U.S.-China trade deal.
The Treasury Department plans to lift its designation, which it made last August, in a semiannual report expected to be released ahead of the Wednesday signing, a Fox Business Network correspondent tweeted. Optimism around the signing of the signing of the “phase one” trade deal helped propel major U.S. stock indexes to fresh intraday highs. Last week markets whipsawed as investors digested the rise and then ebbing of U.S.-Iran tensions, with government bond yields ending the week with a decline after the December jobs report showed the U.S. economy created a weaker-than-expected 145,000 jobs and a subdued reading on wage growth.
What are analysts saying?
Rising Treasury yields are all about positive momentum on the trade front, said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. He pointed out that major U.S. stock indexes hit all-time highs following new reports that the U.S. no longer plans to designate China a currency manipulator.
“All of that is a net positive for risk assets,” he told MarketWatch.
Market participants are also keeping en eye on coming economic data, following Friday’s weaker-than-expected jobs report.
“So far in 2020, market volatility has been very low, so we suspect that the economic data released would have to be extreme in order to get the market moving out of the range that has so far proven difficult to break,” said Thomas Simons, senior money market economist at Jefferies, in a note.
“The first opportunity will be on Tuesday with the release of the [consumer-price index] and gasoline prices could push the [year-over-year] measure north of 2.5% and spark some long-end selling,” he wrote. “That being said, there is a risk that disappointing retail sales on Thursday could whip the market right back to lower yields.”
Read: Happy New Year! The U.S. economy enters 2020 ‘with a little more zip’
Economists surveyed by MarketWatch forecast a 0.3% rise in the CPI, while the core reading, which strips out volatile food and energy prices, is expected to show an increase of 0.2%.
Related: Should stock-market investors start worrying about inflation?
What’s on the economic calendar
Boston Federal Reserve Bank President Eric Rosengren on Monday warned that the Federal Reserve should be on the lookout for risks, including higher inflation and the potential for financial stability problems as the central bank pushes for faster growth, while U.S. unemployment sits at a 50-year low, in a speech in Hartford, Connecticut.
Atlanta Fed President Raphael Bostic is scheduled to speak at a Rotary Club of Atlanta event at 12:40 p.m. Eastern. Neither Rosengren nor Bostic are voting members of the Fed’s rate-setting panel this year.
December data on the federal budget are due at 2 p.m. Eastern.
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