Treasury yields fell on Tuesday, sending the benchmark 10-year rate to a one-week low, after weak trade data from China raised concerns about slowing global economic growth.
What happened
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The yield on the 2-year Treasury
BX:TMUBMUSD02Y
was unchanged at 4.756% versus Monday’s 3 p.m. Eastern time level. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
retreated 5.2 basis points to 4.024% from 4.076% Monday afternoon. Tuesday’s level is the lowest since July 31, according to Dow Jones Market Data. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
fell 5.2 basis points to 4.204% from 4.256% late Monday. - The 10- and 30-year rates were both down two of the past three trading sessions.
What drove markets
Data showed that China’s exports and imports each posted double-digit declines for July, increasing fears of a global economic slowdown and sparking a move into government bonds.
Read: ‘Alarming’ China data upsets global stock markets
A decision by Moody’s Investors Service to review the ratings on six major U.S. banks also weighed on investor sentiment Tuesday.
In other developments, the U.S. trade deficit narrowed to $65.5 billion in June due to declining imports and wholesale inventories declined 0.5% for the same month. Meanwhile, Treasury’s $42 billion auction of 3-year notes came in “strong,” said BMO Capital Markets strategist Ben Jeffery.
Still ahead for this week is the U.S. July consumer-price index report, due on Thursday, which will help determine how the Federal Reserve should proceed with rates. Philadelphia Fed President Patrick Harker said on Tuesday that he thinks the central bank could be at the point where it doesn’t need to raise interest rates further.
Markets are pricing in an 86.5% probability that the Fed will leave interest rates unchanged at a range of 5.25%-5.5% on Sept. 20, according to the CME FedWatch Tool. The chances of a 25-basis-point rate hike to a range of 5.5-5.75% at the subsequent meeting in November is priced at 27.7%.
The central bank is mostly expected to take its fed-funds rate target back down to around 5% or lower by March or May.
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