Bond Report: Treasury Yields Fall As Trump Impeachment Inquiry Stays In The Spotlight

U.S. Treasury yields fell on Thursday as geopolitical jitters from Washington boosted demand for haven assets like U.S. government paper.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, -2.20%  fell 4.7 basis points to 1.685%, while the 2-year note rate TMUBMUSD02Y, -1.16%   was down 3 basis points to 1.654%. The 30-year bond yield TMUBMUSD30Y, -2.11%  tumbled 5.3 basis points to 2.128%.

What’s driving Treasurys?

Investors said they would keep a close watch on resurfacing geopolitical concerns after U.S. House Democrats endorsed an impeachment inquiry into President Donald Trump. It’s not clear, however, if the proceedings will make much headway in a Republican-dominated Senate. The whistleblower complaint that had sparked political uncertainty in Washington was released on Thursday morning.

U.S.-Iran tensions and the possibility of a no-deal Brexit have also kept market participants on edge.

The U.S. Treasury Department auctioned off $32 billion of 7-year notes in the afternoon. The extra issuance to fund a rapidly widening U.S. fiscal deficit has been partly blamed for liquidity problems in money markets in the past couple of weeks.

Investors remain undecided if the Fed’s two interest rate cuts so far this year will be enough to stave off the market’s fears of a recession, exemplified by a Treasury yield curve that is inverted on some measures. A negative spread between short-term and long-term yields can indicate when monetary policy is too constraining for the economy.

In economic data, the revised second-quarter U.S. gross domestic product grew by 2%. Meanwhile, the trade deficit widened slightly to $72.8 billion in August, from $72.3 billion in the previous month. Pending home sales increase 1.6% last month.

What did market participants’ say?

“There’s a fair amount of uncertainty. Some of that’s around trade, and some of that is exacerbated by the announcement of the impeachment inquiry,” Gregory Faranello, head of U.S. rates at AmeriVet Securities, told MarketWatch.

“When you look at the market in general, at least in the 10-year yield, we’re trading in a short-term range,” said Faranello.

RECENT NEWS

Gyrostat October Outlook: Beneath The Calm, The Cost Of Protection Rises

 Even as global equity indices remain near record highs, the pricing of risk is shifting quietly ben... Read more

Gyrostat Capital Management: Solving The Nastiest Problem In Finance

Retirement Income and Sequencing Risk Executive Summary ... Read more

Gyrostat September Outlook: Tranquil Markets, Rising Case For Resilience

Volatility remains muted, and equity indices continue to trade at elevated levels. History reminds us, however,... Read more

Gyrostat Capital Management: A Structural Solution For Liquidity, Defence, And Income

  Absolute Return Income Equity Funds: A Structural Solution For Liquidity, Defence, and Income   ... Read more

Beyond Prediction: Portfolio Resilience In The Age Of AI

Why Over-Relying on AI in Investment Models Can Expose Portfolios to Hidden Risks—And What To Do Instead.... Read more