US Treasury yields were marginally lower on Friday on light volume as traders awaited the outcome of the Group of Seven summit, fretting about growing trade tensions between the United States and its major allies and global economic growth. US President Donald Trump on Friday lashed out at Canada and the European Union before the weekend summit in Charlevoix, Quebec, after he imposed tariffs last week on steel and aluminium imports from the EU and Canada. Their leaders criticized Trump's move and plan to retaliate with their own levies on US products.
Bond traders are also on edge ahead of next week's $66 billion coupon-bearing supply and possible signals on monetary policy coming out of the meetings of US Federal Reserve and European Central Bank policy makers. Traders are also wary ahead of Trump's June 12 meeting with North Korean leader Kim Jong Un in Singapore about Pyongyang's nuclear weapons. "There are so many questions out there," said Thomas Roth, head of Treasury trading at MUFG Securities America in New York. "There's nervousness about the G7 summit and Trump's North Korea meeting."
The yield on benchmark 10-year Treasury notes was 2.926 percent, down 0.3 basis point from late Thursday. The 10-year yield has been on a roller-coaster for two weeks. It was on track to increase about 4 basis points this week, reversing much of last week's drop to a seven-week low tied to fears about political turmoil in Italy.
Investors are also awaiting the outcome of the European Central Bank's debate on Thursday about ending the expansion of its 2.55 trillion euro ($3 trillion) bond purchase program in September. Traders waited for the Fed to signal how many times it would raise interest rates for the rest of 2018 as domestic labor conditions tighten and inflation moves closer to its 2 percent goal. They widely expect the Fed to raise key overnight borrowing costs by a quarter point to a 1.75 percent to 2.00 percent range next Wednesday.
On the supply front, the US Treasury Department planned to sell a combined $68 billion in three-year, 10-year and 30-year securities next week. This week's heavy supply of higher-yielding corporate bonds has helped push up Treasury yields, analysts said. Companies have raised about $36.8 billion in the investment-grade bond market this week, according to IFR, a unit of Thomson Reuters.
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