The president’s lengthy statement on Truth Social sparked a sell-off in stocks and pushed yields out of their recent range pattern, with 10-year Treasury yields hitting their lowest levels since mid-September.
U.S. Treasury yields have been in a holding pattern in recent days as a government shutdown, now in its tenth day, has halted production of crucial economic indicators.
Yields on Chinese government bonds fell broadly on Saturday. This followed US President Donald Trump’s decision to revive the trade war against Beijing. Interest rates on 30- and 10-year bonds saw a notable decline. The US has announced new tariffs and export controls on Chinese goods and software. The Chinese bond market remained open due to a holiday adjustment.
“It’s fuel on the fire. For a while it looked like all was well between Trump and Xi, but China’s latest export controls on rare earth minerals have Trump in stitches,” said Brian Jacobsen, chief economist at Annex Wealth Management.
“A lot could happen between now and the APEC summit where they would meet, so it wouldn’t be surprising if tempers cooled before then.”
In afternoon trading, the yield on the US 10-year Treasury bond fell to the lowest level in more than a month and was last down 9.1 basis points (bps) at 4.057%. The yield on the 30-year Treasury last fell 9.6 basis points to 4.637%, after earlier falling to the lowest level since September 5. At the short end of the curve, the two-year U.S. Treasury yield, which typically moves in line with interest rate expectations, fell 7.5 basis points to 3.512%.
Meanwhile, Alberto Musalem, president of the St. Louis Federal Reserve Bank, said he was “open-minded” about the possible need for an additional rate cut. Earlier, Fed Governor Christopher Waller also told CNBC that the central bank could take “prudent” steps to cut interest rates, which could ease investor expectations that the central bank would not be driven to excessive rate cuts by staffing changes and a weakening labor market.
A closely watched part of the U.S. Treasury yield curve, which measures the difference between two- and 10-year Treasury yields, seen as an indicator of economic expectations, is flattening to a positive 52.8 basis points, compared with a positive 54.30 late Thursday.
Also on Friday, the University of Michigan reported that a consumer sentiment survey had modestly exceeded expectations, with a slight slowdown still evident in October. This marked the third monthly decline and added to fears over private indicators of labor market weakness.
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