Treasury yields on Monday climbed to kick off early trading in April, after mostly rising in the first quarter of 2018, as investors positioned ahead of a data-heavy week.
Bond investors appeared to mostly shake off expected retaliatory trade moves from China, which announced tariffs on about 130 U.S. goods, including a 25% penalty on U.S. pork and 15% on fruit.
The actions come in response to back-and-forth moves between Beijing and the U.S., which last month announced duties on steel and aluminum imports and other targeted import tariffs against the world’s second-largest economy.
European markets are mostly closed in observance of Easter Monday, while most markets were shuttered on Friday ahead of the Easter and Passover holidays.
How are Treasurys performing?
The 10-year Treasury note yield TMUBMUSD10Y, +1.16% rose 2.1 basis points at 2.762%. The yield was down 8.6 basis points last week and retreated 12.9 basis points in March. The yield advanced 33.2 basis points in the first three months of 2018, representing the largest quarterly rise since 2016.
The two-year note yield TMUBMUSD02Y, +0.71% picked up 1.2 basis points to 2.282%. The short-dated note rose 38.3 basis points in the first quarter.
Meanwhile, the 30-year bond yield TMUBMUSD30Y, +0.96% added 1.7 basis points to 2.992%.The yield for the long bond lost 9.9 basis points last week, declined 15.5 basis points for the month, but advanced 23.2 basis points during the quarter.
Bond prices fall as yields rise.
What’s driving the market?
Treasury investors are focused on coming data, including the jobs report due on Friday, for further signs on the health of the U.S. economy. That focus on economic reports comes as global equity markets showed caution over the highflying technology sector XLK, +1.98% which had propelled risk assets to new heights in 2017 but now shows signs of fading in the latter part of the 2018.
Protectionist policies and fiscal stimulus emanating from President Donald Trump’s administration also has been closely followed against the backdrop of a Federal Reserve that is attempting to normalize monetary policy without tilting the economy into recession. The Fed lifted interest rates last month and investors expect two further rate increases during the remainder of the year. Perhaps more importantly, the central bank hinted at a brisker pace of hikes in coming years, which helped to nudge yields higher.
What data are ahead?
The Markit manufacturing purchasing managers index for March is due at 9:45 a.m. Eastern Time, followed by the Institute for Supply Management manufacturing index for March at 10 a.m., with construction spending for February due at the same time.
What are strategists saying?
“Speculative positioning in [Treasury] futures shows large speculators with net short-positions in the bottom historical decile, an area consistent with a rally in bond prices,” wrote Jeff deGraff, analyst at Renaissance Macro Research, in a Monday research note.
What other assets are in focus
The Dow Jones Industrial Average DJIA, +1.07% and the S&P 500 index SPX, +1.38% appear set to decline to start trading in April, which may provide a lift for stocks in later trading on Monday.
Official Chinese manufacturing data over the weekend indicated a three-month high but stocks in Asia weakened as tech worries spread globally.
The ICE U.S. Dollar Index DXY, -0.15% which measures the buck’s strength against that of a half-dozen rivals, fell 0.2% at 89.92 on Monday, with a weaker dollar making buying in bonds less attractive for buyers searching for a strengthening currency to park their money.