Treasury prices rose Tuesday, pulling bond yields lower, as traders grappled with the renewed threat of trade tariffs after the U.S. threatened to slap import levies on the European Union.
The 10-year Treasury note yield TMUBMUSD10Y, -1.06% was down 1.8 basis points to 2.499%. The 2-year note yield TMUBMUSD02Y, -0.51% fell 1.8 basis points to 2.340%. The 30-year bond yield TMUBMUSD30Y, -0.41% edged lower by 1.6 basis points to 2.907%. Bond prices move inversely to yields.
Stocks fell and haven assets like government paper rose following the U.S. Trade Office’s representative talk of imposing tariffs on the European Union, in retaliation against the EU’s financial support for aircraft manufacturer Airbus SE AIR, -1.86% This comes on the heels of reports that the U.S. is in the last stages of its talks to end its longstanding trade dispute with China.
“Treasury prices are rising due Trump’s comments on imposing EU trade tariffs and conflicting headlines on Brexit,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.
After the opening bell, the S&P 500 SPX, -0.61% fell more than 0.4%, and the Dow Jones Industrial Average DJIA, -0.72% shed more than 100 points, FactSet data show.
The U.S. Treasury Department sold $38 billion of 3-year notes to solid demand, the first of three auctions scheduled for the week. A fresh influx of debt supply can influence trading in outstanding government paper.
Investors also said a debt sale from Saudi Arabia’s state-backed oil producer could later draw selling from the Treasurys market on Tuesday. Dealers temporarily sell U.S. government paper to lock in the borrowing rate of the corporate bonds they are underwriting. Once the bond is sold, the dealer repurchases the Treasurys again.
Saudi Arabia’s debt offering had drawn $100 billion of orders, well above the range of $10 billion to $15 billion expected to be put on the block, according to Tuesday reports.
In other news, the NFIB small-business optimism index for March came in at a reading of 101.8, not far from the February’s reading of 101.7.
Later Tuesday, the Federal Reserve’s Vice Chairman for Supervision Randal Quarles will speak at 5 p.m. Eastern Time, followed by Fed Vice Chairman Richard Clarida at 6: 45 p.m.
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