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Treasury yields declined on Monday as renewed geopolitical tensions helped boost demand for bond-market safety plays. Bond yields move inversely to prices, rising as prices fall, and vice-versa.
Price action
-
The yield on the 2-year Treasury note
TMUBMUSD02Y,
3.995%
declned by 1.2 basis points to 3.974%. -
The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.422%
retreated by 4.3 basis points to 3.386%. -
The yield on the 30-year Treasury note
TMUBMUSD30Y,
3.633%
declined by 4.6 basis points to 3.575%.
Market drivers
Treasury yields pulled back in thin post-holiday trade with much of Europe on holiday. Analysts blamed the market reaction on the latest tiff between Beijing and Washington after a U.S. Navy destroyer sailed through waters near the Spratly Islands in the South China Sea, a key nexus for global trade which is claimed by Beijing.
That show of strength followed Chinese military exercises around Taiwan over the weekend, as Beijing responded with aggressive military posturing following a meeting between Taiwan’s leader, Tsai Ing-wen, and House Speaker Kevin McCarthy.
“The overnight price action was credited to an increase in geopolitical saber-rattling following reports that the US Navy sent a destroyer through waters near the Spratly Islands claimed by Beijing,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
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