Bond Report: Treasury yields hold lower as investors watch for housing data and China-U.S. tensions

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U.S. Treasury yields slipped for a second day early Tuesday as fixed-income investors picked up bonds amid rising animosities between China, while equities market bullishness appeared to be fading even though stocks again neared record levels after better than expected corporate earnings despite the coronvirus pandemic.

Foreign buyers of also have proved be a big support to U.S. government bonds, keeping yields in check and prices elevated.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.686% fell 0.9 basis point to 0.674%. The 30-year bond yield TMUBMUSD30Y, 1.425% retreated 1.3 basis points to 1.411%.

The 2-year note rate TMUBMUSD02Y, 0.153%, meanwhile, was little-changed at 0.149%.

What’s driving Treasurys?

Yields for government debt have fallen again this week, reversing some of a climb that Treasuries made last week to push that pushed long-dated bond rates toward an eight-week high.

The U.S. Commerce Department issued new rules curbing Huawei Technologies’s access to foreign-made chips Monday, expanding the Trump administration’s restrictions on the Chinese telecom company’s link to crucial components.

Meanwhile, Senate Majority Leader Mitch McConnell’s comments that ongoing discussions on fresh coronavirus fiscal stimulus may not definitely lead to a deal, combined with media reports that Republicans are weighing further reducing the proposed stimulus amount, are sapping some of the optimism, Deutsche Bank analysts said in a note.

Against that back drop, equity markets have been making tepid moves higher, with the S&P 500 index SPX, +0.27% approaching its first record close since Feb. 19, but momentum has been stalled partly due to the lack of substantive progress toward additional aid for out-of-work Americans.

On the U.S. economic data front, a report on Treasury buying published Monday showed that foreign buyers have been a support factor for Treasurys in June, with foreign inflows into the U.S. totalling $28.89 billion, compared with outflows of $36.69 billion the previous month.

Looking ahead, investors will also gather additional insights into the health of the U.S. housing market at 8:30 a.m. Eastern, when the government issues a reading on housing starts for July.

What are market participants saying?

“We continue to watch 1.45% on 30yr yields to hold, however, trading through there would target 1.63%,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.