Bond Report: 2-year Treasury Yield Stages Biggest Daily Rise In 7 Weeks As Stocks Bounce

Treasury prices fell on Friday, pushing yields higher, as U.S. equities erased some of the previous session’s slump, sapping appetite for government paper.

U.S. bond markets saw a holiday-shortened session, closing at 2 p.m. Eastern Time, in observance of Memorial Day, and will be closed on Monday.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, +0.00% rose 3.2 basis points to 2.327%, trimming its weeklong drop to 6.9 basis points. The 2-year note yield TMUBMUSD02Y, +0.00% was up 4.5 basis points to 2.175%, marking its biggest daily increase since April 1. The short-dated maturity fell 3 basis points for the week.

The 30-year bond yield TMUBMUSD30Y, +0.00% rose 2.3 basis points to 2.754%, paring its weeklong decline to 7.1 basis points. Debt prices move in the opposite direction of yields.

Meanwhile, yields for British 10-year pounds TMBMKGB-10Y, +0.00% known as gilts, fell a single basis point to 0.955% after U.K. Prime Minister Theresa May announced her resignation due to her inability to pass a Brexit deal.

What’s driving Treasurys?

With stock markets set to take a break from this Thursday’s selloff, inflows into the bond-market waned. The S&P 500 SPX, +0.14% and the Dow Jones Industrial Average DJIA, +0.37% were on course to end higher on Friday, paring their weeklong losses.

President Donald Trump said he anticipated a “fast” trade deal with China, and that the U.S. could pull back its ban against Huawei Technologies Inc. as part of an agreement. Investors have grown fearful that a resolution to the longstanding trade spat between the U.S. and China would remain elusive, with some pointing to the U.S.’s ban on Huawei as a sign of an entrenching dispute between the two sides.

Yields briefly sagged after investors digested some downbeat data on the business investment front. Durable goods orders for April fell 2.1%, following a 2.6% increase in March. The more stable core capital goods orders measure, which excludes defense and aircraft investment, fell 0.9%.

What did market participants say?

“The more tensions escalate and the longer the negotiations continue, the more uncertainty there will be and become more of a drag be on investment spending in the U.S.,” said Ward McCarthy, chief financial economist for Jefferies.

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