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Bond Report: U.S. Treasury yields climb amid global reflation fears

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U.S. Treasury yields rose overnight on Friday’s trade amid signs of reflationary forces brewing in the world’s second largest economy.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
1.674%

rose 4.3 basis points to 1.675%. The 2-year note rate
TMUBMUSD02Y,
0.160%

gained around a basis point to 0.161%, while the 30-year bond yield
TMUBMUSD30Y,
2.353%

stood at 2.350%, up 2.8 basis points from Thursday.

What’s driving Treasurys?

The bond market grappled with inflation fears at the end of the week, following economic data showing factory prices in China had risen the most in over two years as businesses looked to pass on higher raw material costs.

See: The biggest ‘inflation scare’ in 40 years is coming — what stock-market investors need to know

Chinese producer prices grew by 4.4% in March year-over-year, though consumer prices saw a more muted increase of 0.4%.

Investors have shown increased attention to more supply-driven sources of inflation this year amid reports of gummed-up supply chains, climbing commodity prices and a surge in shipping costs.

In U.S. economic data, a gauge of wholesale prices for last month are due at 8:30 a.m. ET

Read: Asian stocks falls after Chinese inflation data surprises to the upside

What did market participants say?

“The largest increase in factory gate prices for almost 3 years hit risk sentiment, with Asian markets drifting lower on Friday, and will capture the attention of global policy makers already concerned amount rising inflationary pressures. As the world’s largest exporter, there is growing risk China could ‘export’ such inflation to the rest of the world,” said John Leiper, Chief Investment Officer at Tavistock Wealth.

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