Treasury yields were little changed in Friday trade, but were mostly lower for the week, after a swoon for global stocks on worries about escalating trade tensions between China and the U.S.
How are Treasurys performing?
The yield on the 10-year Treasury note TMUBMUSD10Y, +0.72% edged 0.4 basis point lower to 2.828%, a day after the benchmark security logged its largest single-day drop since Sept. 5, according to WSJ Market Data Group.
The 30-year Treasury bond yield TMUBMUSD30Y, +1.17% rose 1.6 basis points to 3.082%, climbing after putting in the largest one-day fall since Dec. 27 in the previous session.
The 2-year note yield TMUBMUSD02Y, +0.92% meanwhile, added 0.8 basis point to 2.91%.
The yield curve as measured by the spread between the 2-year note and the 10-year, a differential bond traders view as a gauge of the economic outlook, was at 53.7 basis points, holding around the narrowest since late January.
For the, week, the 10-year Treasury yield is down 2 basis points, the 30-year yield is virtually unchanged, while the 2-year yield, the most sensitive to changes in monetary policy, ticked 0.4 basis point lower.
Bond prices move in the opposite direction of yields.
Need to know: ‘I don’t think this is a trade war,’ says veteran Wall Street strategist
What are driving markets?
Investors are focused on the potential for a global trade war erupting, as China threatens to retaliate against the Trump administration’s tariffs on up to $60 billion worth of goods. China’s commerce ministry on Friday said it would impose tariffs on $3 billion in U.S. goods. Beijing officials have charged that the U.S.’s duties violate world trade pacts.
Concerns about trade conflicts sent investors running for the perceived safety of havens like government bonds, gold GCJ8, +1.38% and the yen USDJPY, -0.08% with the Japanese currency touching its highest level against the buck since late 2016.
Fears of an outright trade conflict has placed the Federal Reserve’s decision on Wednesday to raise interest rates a quarter-point and communicate its intention to normalize policy at a slightly faster clip than anticipated in coming years in the background. Such actions should drive yields higher, as investors dump bonds on anticipations of higher rates from coming issuance, but the flight to safety has moderated those rates moves.
Separately, turnover in the White House also has drawn some focus after President Trump named John Bolton his new national security adviser, succeeding Lt. Gen. H.R. McMaster.
The personnel change comes after Trump replaced Secretary of State Rex Tillerson with Central Intelligence Director Mike Pompeo.
Moreover, Bolton is viewed as a controversial figure related to his tough stances on Iran and North Korea, which could be a source of market unease.
What are strategists saying?
“President Trump imposed $60 billion worth of tariffs on China on Thursday; Stock markets tanked on the news, with the S&P 500 sliding 2.5% on the day. China retaliated by unveiling $3 billion worth of tariffs on US imports to China. It is interesting to note that China holds $1 trillion in US Treasurys,” wrote Robert Yawger, director at Mizuho Securities USA
What data and Fed speaker are ahead
Durable-goods orders for February will be released at 8:30 a.m. Eastern Time, along with core capital orders. New home sales for February are due at 10 a.m. Eastern.
Minneapolis Fed President Neel Kashkari will take part in a discussion about the economy in New York at 10:30 a.m., Dallas Fed President Rob Kaplan will appear at the Trellis Foundation Summit at 11:30 a.m. and Boston Fed President Eric Rosengren will give a speech at the Fed’s international research forum at 7 p.m.
What other assets are in focus?
The Dow Jones Industrial Average DJIA, -2.93% and the S&P 500 index SPX, -2.52% were poised to open flat to slightly higher Friday, but remained on track to post sharp weekly decline.
Meanwhile, the German 10-year Treasury note TMBMKDE-10Y, +3.02% edged higher to 0.531% from 0.526% on Thursday. Known as bunds, the German bond is often viewed as a proxy for the health of the eurozone.