Renewable Energy

U.S. yields rise as stocks advance on Huawei news

Credit: REUTERS/THOMAS WHITE

U.S. Treasury yields edged higher on Tuesday, lifted by gains in Wall Street shares and higher risk appetite overall after the United States eased trade restrictions on Chinese telecommunications equipment maker Huawei Technologies.

By Gertrude Chavez-Dreyfuss

NEW YORK, May 21 (Reuters) - U.S. Treasury yields edged higher on Tuesday, lifted by gains in Wall Street shares and higher risk appetite overall after the United States eased trade restrictions on Chinese telecommunications equipment maker Huawei Technologies.

The move was a step in the right direction in terms of calming escalating trade tensions between the United States and China, analysts said.

The United States on Tuesday temporarily eased trade restrictions on China's Huawei to minimize disruption for its customers. The U.S. Commerce Department blocked Huawei [RIC:RIC:HWT.UL] from buying U.S. goods last week, saying the firm was involved in activities contrary to national security.

Yields on U.S. benchmark 10-year notes and 30-year bonds rose to one-week highs on Tuesday, while those on two-year notes hit two-week peaks.

"This is partly optimism in equities causing a reversal of the moves we saw last week," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York, as well as a reduction in the markets' rate cut forecasts.

"There's optimism about progress in the ongoing U.S.-China trade talks," she added.

In mid-morning trading, U.S. 10-year note yields rose to 2.426% US10YT=RR, up from 2.414% late on Monday, after earlier hitting a one-week high of 2.435%.

Yields on U.S. 30-year bonds advanced as well to 2.842% US30YT=RR, up from 2.835% on Monday. Earlier in the session, 30-year yields touched one-week highs of 2.849%.

On the short end of the curve, U.S. 2-year yields were up at 2.245%, compared with Monday's 2.223% US2YT=RR.

U.S. yields, however, briefly slipped after U.S. home sales unexpectedly fell in April amid persistent weakness in the lower-priced segment of the market.

The National Association of Realtors said on Tuesday existing home sales fell 0.4% to a seasonally-adjusted annual rate of 5.19 million units last month. March's sales pace was unrevised at 5.21 million units.

But Jon Hill, U.S. rates strategist at BMO Capital Markets in New York, said details of the housing report showed a much healthier picture. He cited gains in condominium and co-op sales and smaller declines in existing home sales compared to the previous month.

"All in all, another solid read on the housing market that is consistent with the narrative of stabilization, rebound in the sector," he said.

May 21 Tuesday 10:43AM New York / 1443 GMT

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

2.34

2.3868

-0.004

Six-month bills US6MT=RR

2.345

2.4127

0.000

Two-year note US2YT=RR

100-2/256

2.2455

0.023

Three-year note US3YT=RR

99-204/256

2.1957

0.022

Five-year note US5YT=RR

100-32/256

2.223

0.020

Seven-year note US7YT=RR

100-88/256

2.321

0.017

10-year note US10YT=RR

99-140/256

2.4264

0.012

30-year bond US30YT=RR

100-164/256

2.8431

0.008

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

5.75

0.00

U.S. 3-year dollar swap spread

4.00

0.00

U.S. 5-year dollar swap spread

0.75

0.00

U.S. 10-year dollar swap spread

-4.75

0.25

U.S. 30-year dollar swap spread

-28.00

0.00

(Reporting by Gertrude Chavez-Dreyfuss Editing by Paul Simao)

((gertrude.chavez@thomsonreuters.com; 646-223-6322; Reuters Messaging: gertrude.chavez.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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