NEW YORK: US Treasury yields fell on Wednesday, weighed down by worsening trade tensions between the United States and China after a media report that the Trump administration is considering limits to Chinese video surveillance firm Hikvision's ability to buy American technology.
Investors were also spooked by developments in Britain's troubled attempt to exit the European Union, fueling declines in US long-dated yields after hitting one-week highs the previous session.
That said, the Federal Reserve will take center stage later on Wednesday when it releases the minutes of its latest monetary policy meeting. Analysts though do not expect surprises from the minutes.
But over the last few days, the US-China trade saga has been at the front and center of bond investors' radar.
The New York Times reported late on Tuesday, citing people familiar with the matter, that the US Commerce Department may require that US companies obtain government approval to supply components to Hikvision, limiting the company's access to technology that helps power its equipment.
That came after Washington temporarily eased curbs against Chinese telecommunications equipment maker Huawei Technologies.
"These days we have been trading a lot on headline risks and right now, we see renewed trade concerns with China," said Justin Lederer, Treasury trader at Cantor Fitzgerald in New York.
The Chinese government's top diplomat, Wang Yi, said on Wednesday that US pressure on Chinese firms such as Huawei is economic bullying and a move to try to prevent the country's development process.
Aside from China, UK worries continued to help boost US bond prices after Prime Minister Theresa May's final ploy to win support for her Brexit plan failed to win over either opposition lawmakers or many in her own party.
In late morning trading, US 10-year note yields fell to 2.398pc from 2.426pc late on Tuesday.
Yields on US 30-year bonds slid to 2.818pc from 2.842pc on Tuesday.
On the short end of the curve, US 2-year yields were down at 2.228pc from Tuesday's 2.258pc.
With China and Brexit in the background, the Fed minutes will be scrutinized for clues about where US interest rates are headed.
Jim Vogel, senior rates strategist, at FTN Financial in Memphis, Tennessee said given higher rates that followed Fed Chairman Jerome Powell's podium appearance three weeks ago, investors will be on alert for discussions or disagreements that might dent the "no insurance cut" takeaway that started rates higher.
But if the Fed stands pat, "look for a flatter curve with firmer prices just past the 5-year," Vogel said.
Comments
Comments are closed.