Treasury yields rally after China offers import more US goods
U.S. government debt yields added to a weeklong climb Friday after Chinese officials offered to boost U.S. imports for six years, a move some investors saw as a positive step in the extended trade dispute between the world’s two largest economies.
The yield on the benchmark 10-year Treasury note was higher at around 2.788 percent, an increase of about 11 basis points since Monday. The yield on the 30-year Treasury bond was also higher at 3.104 percent. Yields rise when bond prices fall.
Chinese officials made the offer during deliberations in Beijing earlier in January, Bloomberg News reported. China would increase its annual import of U.S. goods by a combined value of over $1 trillion.
The latest trade developments came after the Wall Street Journal reported Thursday that the U.S. could ease trade tariffs against China. The suggestion reportedly came from Treasury Secretary Steven Mnuchin, but faced backlash from U.S. Trade Representative Robert Lighthizer. Wall Street rallied on the news but pared some of those gains after a senior government official told CNBC that Mnuchin had not made any such recommendations.
Money managers were also following U.S. politics as the government shutdown continues into its 28th day.
New York Fed President John Williams doubled down on recent calls from other central bank officials that suggest a less aggressive approach to rate hikes in this year following four increases to the federal funds rates in 2018.
“The approach we need is one of prudence, patience, and good judgment,” he told bankers at a forum in Somerset, New Jersey. “The motto of ‘data dependence’ is more relevant than ever.”
Fed Chairman Jerome Powell tempered investor concerns earlier this month when he said that the central bank will remain data dependent when considering adjustment to the reduction of its enormous balance sheet and additional increases to the federal funds rate.
Those comments marked a pivot from the Fed’s December meeting, when Powell had said that the central bank’s balance sheet wind-down was on “autopilot.” He has since reversed that impression and reiterated to investors that the Federal Open Market Committee would be flexible in using its policy tools, including the balance sheet.