Treasuries Move Higher Amid Renewed Trade Concerns
(RTTNews) - After ending the previous session modestly lower, treasuries moved back to the upside during the trading day on Tuesday.
Bond prices gave back some ground after an early advance but remained in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 2 basis points to 2.499 percent.
The strength among treasuries came as traders retreated to safe havens ahead of the release of closely watched reports on inflation in the coming days as well as the start of earnings season.
Financial giants JPMorgan Chase (JPM) and Wells Fargo (WFC) are due to report their quarterly results on Friday, shedding light on what may have been a difficult quarter.
Concerns about the global economic outlook also increased the appeal of bonds, particularly after President Donald Trump threatened to impose tariffs on European goods in response to European Union subsidies to Airbus.
U.S. Trade Representative Robert Lighthizer estimates the harm from the EU subsidies as $11 billion in trade each year, with the amount subject to arbitration at the World Trade Organization.
"This case has been in litigation for 14 years, and the time has come for action," Lighthizer said. "The Administration is preparing to respond immediately when the WTO issues its finding on the value of U.S. countermeasures."
"Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft," he added. "When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted." Meanwhile, a European Commission spokesman called the estimated adverse effects of the subsidies "greatly exaggerated" and pledged to retaliate against any new U.S. tariffs.
The trade dispute between Trump and the EU comes amid lingering uncertainty about the U.S. and China reaching a final trade agreement.
Traders largely shrugged off the results of the Treasury Department's auction of $38 billion worth of three-year notes, which attracted modestly below average demand.
The three-year note auction drew a high yield of 2.301 percent and a bid-to-cover ratio of 2.49, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.59.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Looking ahead, the Treasury is due to sell $24 billion worth of ten-year notes on Wednesday and $16 billion worth of thirty-year bonds on Thursday.
Trading on Wednesday is also likely to be impacted by reaction to a report on consumer price inflation as well as the minutes of the latest Federal Reserve meeting.