Treasury Market Outlook: a recovery in European bourses and U.S. equity futures
Treasury Market Outlook: a recovery in European bourses and U.S. equity futures has boosted core bond yields slightly. Treasury rates are up about 1.4 bps on the 10-year at 2.416%, with the 2-year 0.6 bps cheaper at at 2.194%, though both are off of Asian lows where fallout from yesterday's 2.4% drop in the S&P 500 weighed on Asian markets as the Hang Seng played catch up from Monday's holiday. The Bund is 0.5 bps higher at -0.067%, but off of a -0.05% high after an unexpected decline in the ZEW investor confidence reading. The Gilt is 1 bp higher at 1.109%, but off of a 1.118% high. Chinese shares closed about 0.6% lower, garnering only modest support from rumored purchases from state backed players, as well as comments from Chinese officials who indicated the nation does not want a trade war, and from rather conciliatory comments from President Trump who said he and President Xi will meet in June at the G20, suggesting he'll hold off on the additional tariffs for now. All that calmed nerves and enticed some dip buying. In other overnight news, UK March unemployment unexpectedly fell to 3.8%, the lowest since 1974. There was also some talk China may sell Treasuries to support the yuan amid concerns a break of 7 per dollar could start a vicious cycle capital outflows. Also NY Fed's Williams reiterated policy is in a good place in a Bloomberg interview, but added higher tariffs will impact growth and inflation. In his Zurich speech he said rate cut space in the future may be limited, meaning recoveries will be slower. Today's calendar is light with just April trade prices and weekly chain store sales. George and Daly are also speaking.