With traders expressing renewed concerns about a global trade war, treasuries showed a notable move to the upside during trading on Wednesday.
After seeing modest strength for much of the session, bond prices climbed to new highs in late-day trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.1 basis points to 2.842 percent.
Treasuries benefited from their appeal as a safe haven after President Donald Trump’s administration proposed new tariffs on China.
Trump has ordered U.S. Trade Representative Robert Lighthizer to begin the process of imposing tariffs of 10 percent on an additional $200 billion of Chinese imports.
The move comes after the U.S. imposed a 25 percent tariff on $34 billion worth of Chinese imports last Friday, leading China to retaliate by imposing tariffs on $34 billion worth of U.S. exports.
“For over a year, the Trump Administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition,” Lighthizer said. “We have been very clear and detailed regarding the specific changes China should undertake.”
“Unfortunately, China has not changed its behavior – behavior that puts the future of the U.S. economy at risk,” he added. “Rather than address our legitimate concerns, China has begun to retaliate against U.S. products. There is no justification for such action.”
China has vowed to take countermeasures in response to the new tariffs, which will not effect until after a two-month review process.
In U.S. economic news, the Labor Department released a report showing producer prices increased by slightly more than expected in the month of June.
The Labor Department said its producer price index for final demand rose by 0.3 percent in June after climbing by 0.5 percent in May. Economists had expected prices to edge up by 0.2 percent.
Excluding food and energy prices, core producer prices also climbed by 0.3 percent in June, matching the increase seen in May. Core prices had been expected to rise by 0.2 percent.
Compared to the same month a year ago, producer prices were up by 3.4 percent in June, representing the largest 12-month increase since a 3.7 percent jump in November of 2011.
Meanwhile, the Treasury Department auctioned $22 billion worth of ten-year notes, attracting above average demand.
The ten-year note auction drew a high yield of 2.859 percent and a bid-to-cover ratio of 2.57, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.48.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Looking ahead, the Treasury is due to finish off this week’s series of long-term securities auctions with the sale of $14 billion worth of thirty-year bonds on Thursday.
Reports on consumer prices and weekly jobless claims may also attract attention on Thursday, although traders are also likely to keep an eye on any developments regarding trade.
by RTTNews Staff Writer
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