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June 6, 2019, 3:34 p.m. EDT

Treasury yields come off session lows as tariff fears wane

10-year Treasury yield lurks around 2.12%

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By Sunny Oh

Treasury yields climbed from intraday lows on Thursday following reports that President Donald Trump could delay the imposition of tariffs on Mexico.

What are Treasurys doing?

The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.51% was virtually unchanged at 2.124%, after plumbing an intraday low at 2.091%, while the 2-year note yield /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +1.54% climbed 4.2 basis points to 1.881%. The 30-year bond yield /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y +1.27% fell a single basis point to 2.621%.

What’s driving Treasurys?

Stocks jumped and government bonds sold off after Bloomberg News reported that the U.S. was contemplating delaying the threatened tariffs on Mexico. This comes as U.S. and Mexican representatives are meeting for a second day to resolve their spat over the flow of migrants into U.S. borders. Trump said last week if Mexico failed to act on the issue, he would slap a 5% tariff on all Mexican imports come Monday.

Although investors are hoping Republicans will lead the White House to back down on the tariff threat, Trump’s insistence that he could push ahead with levies have kindled uncertainty among market participants in the past few days.

The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.06%   and Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.92%   were on course to string together a three-day winning streak.

The European Central Bank said it could keep rates at present levels until at least 2020, a change from its previous pledge to stand pat at least through the end of 2019. Still, ECB President Mario Draghi said the central bank could carry out rate cuts if economic conditions worsened. Draghi’s comments helped to lower long-dated yields in the U.S. and Europe.

The 10-year German government bond yield /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y +8.59%   fell 1.6 basis points to negative 0.237%. German debt is considered the proxy for the broader eurozone market.

See : Draghi says ECB willing to cut rates, make other moves if conditions deteriorate

What did market participants say?

“It’s a bit discouraging to see the White House using tariffs to execute social policy. It’s another layer of increased uncertainty, and we’re already late into the business cycle,” Thanos Bardas, a portfolio manager at Neuberger Berman, told MarketWatch.

“If these trade concerns last for a few more months, it could force the Fed to act more decisively,” said Bardas.

What else is on investors’ radar?

In economic data, weekly jobless claims stood at 218,000 for the week ending in June 1. The trade deficit for April fell to $50.8 billion, from $51.9 billion in March.

New York Fed President John Williams said the central bank may want to reassess how it intends to push inflation closer to the Fed’s 2% target, describing the persistence of subdued inflation as a pressing issue. Meanwhile, Dallas Fed President Robert Kaplan said trade with Mexico was “overwhelmingly” to the benefit of the U.S.

add Add to watchlist BX:TMUBMUSD10Y
BX : Tullet Prebon
+0.03 +1.51%
Volume: 0.00
Oct. 15, 2019 12:37p
add Add to watchlist BX:TMUBMUSD02Y
BX : Tullet Prebon
+0.02 +1.54%
Volume: 0.00
Oct. 15, 2019 12:33p
add Add to watchlist BX:TMUBMUSD30Y
BX : Tullet Prebon
+0.03 +1.27%
Volume: 0.00
Oct. 15, 2019 12:36p
+31.48 +1.06%
Volume: 768.73M
Oct. 15, 2019 12:37p
US : Dow Jones Global
+246.28 +0.92%
Volume: 120.81M
Oct. 15, 2019 12:37p
add Add to watchlist BX:TMBMKDE-10Y
BX : Tullet Prebon
+0.04 +8.59%
Volume: 0.00
Oct. 15, 2019 6:01p

Sunny Oh is a MarketWatch fixed-income reporter based in New York.

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