US-China Trade Tensions Ease & Japan Agrees Coalition

Concerns about the state of credit markets in the US has led to a rally in US treasuries. It's all the four, the 10-year drop below 4% last week. It's just back above that now. Let's bring in Blumboats, a very tight sell in terms of the flows and the concerns about the credit market. Do those concerns continue and what is it doing across the Treasury curve?

Tom Mackenzie

Bree

Well, last week's price action showed us that treasuries are a safe haven again. We had a rally kicked off by two different topics. First it was those China trade tensions escalating. Then it was those credit worries focused on the regional banks. So two rounds of Treasury Market rallies, both showing that treasuries are a safe haven still. On Friday, yields dropped to lowest levels since April. Those are stress levels. Concerns now that the Treasury rally might be over. Seeing tensions with China deescalate. Worries over the regional bank credit scenario were relieved on Friday. So perhaps we're headed for a week of steadily higher Treasury yields as we head into the US CPI report on Friday.

Are you expecting yields to rise further then this week?

Tom Mackenzie

Bree

I think yes, potentially. Weakness in fixed income could come from Europe, especially the French OAT bond market. But generally, the US Treasury yields could see upward pressure this week.

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