BOND REPORT: Treasury Yields End Lower For The Week As Global Trade Tensions Spur Haven Demand
22 Junio 2018 - 3:29PM
Noticias Dow Jones
By Mark DeCambre, MarketWatch , Sunny Oh
Trump threatens tariffs on car imports from EU
Treasury yields held their ground on Friday after a week that
saw the traditional haven boosted by anxieties centered on trade
clashes between the U.S. and major trading partners such as China
and the European Union.
Investors scooping up U.S. government paper to take shelter from
turmoil in global stocks have anchored bond yields, giving a modest
lift to prices. Financial markets are grappling with fears that
tariff disputes could--if they erupt into a full-blown trade
war--prove a major headwind for the global economy.
What are Treasurys doing?
The 10-year Treasury note yield was up by 0.4 basis point to
2.902%, trimming its weeklong decline to 2.4 basis points.
The 2-year note yield , the most sensitive to interest-rates
expectations, was up 0.8 basis point to 2.549%, but down 0.8 basis
point this week. Meanwhile, the 30-year bond yield , was mostly
unchanged at 3.045%, and showed little change for the week.
Bond prices move in the opposite direction of yields.
What did market participants say?
The European Union said it would begin implementing tariffs
(http://www.marketwatch.com/story/eu-to-impose-tariffs-on-32-billion-of-us-goods-starting-friday-2018-06-20)
on $3.2 billion in U.S. imports on Friday. That comes amid
escalation of tensions between China and the U.S. after President
Donald Trump at the start of the week threatened to impose as much
as $400 billion in levies on Chinese goods,
(http://www.marketwatch.com/story/trump-seeks-additional-200-billion-in-tariffs-against-china-and-threatens-even-more-2018-06-18)
drawing a swift retaliation from Beijing. In a recent tweet,
(http://www.marketwatch.com/story/trump-today-president-threatens-tariffs-on-european-cars-tells-republicans-to-stop-wasting-their-time-on-immigration-2018-06-22)
Trump threatened 20% tariffs on cars imported from the European
Union.
Fears of a tit-for-tat conflict have kept a steady flow of
investors into haven assets like U.S. government bonds against a
backdrop of volatility in stocks and other assets perceived as
risky. The bullish undertone in Treasurys was balanced by the
Federal Reserve's hawkish stance. Fed officials including Chairman
Jerome Powell have underlined the need for gradual rate increases
despite fears the global economy could take a hit from a trade
war.
But a few market participants say should a trade war break out,
it could push the Fed to slow its rate-hike trajectory. Fed
Chairman Jerome Powell noted this week that though trade
uncertainty may not be showing up in economic data, it was figuring
in the thoughts of corporate executives, who have started to harbor
doubts whether to roll out business investment against a
deteriorating global outlook.
See: Trade tensions will slow the Fed's rate-hike path, solving
a bond market conundrum
(http://www.marketwatch.com/story/trade-tensions-will-slow-the-feds-rate-hike-path-solving-a-bond-market-conundrum-2018-06-22)
Read: Why a major trade war could mean a 'full-blown recession'
(http://www.marketwatch.com/story/why-a-major-trade-war-could-mean-a-full-blown-recession-2018-06-22)
What did market participants say?
"We have a Fed that is pretty well committed to continuing to
raise rates, but an administration that is continuing to push
towards a global trade war. In the end, we expect that these
threats of tariffs will eventually lead to negotiated trade deals
that avoid the worst-case-scenario for the economy and inflation,
and as such we are bearish on the market," said Ward McCarthy,
chief financial economist for Jefferies, in a note.
"Protectionist trade policy and the threat of a full-blown trade
war are the key risks at this juncture. A significant slowdown in
trade would materially deteriorate the global growth outlook with
repercussion for risky assets, with [emerging-market] assets being
especially exposed," wrote Elia Lattuga, cross asset strategist at
UniCredit Bank in London.
How are other assets doing?
Stocks rebounded slightly on Friday. The blue-chip Dow Jones
Industrial Average snapped its losing streak of eight sessions. The
S&P 500 and the Dow finished up by more than 0.2%.
(END) Dow Jones Newswires
June 22, 2018 16:14 ET (20:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.