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Bond Report: Treasury yields pull back as concerns about global slowdown take hold


Treasury yields were little changed to lower Monday morning as weak factory data in the U.S. and an unexpectedly big drop in retail sales in China reinforced concerns about a global slowdown.

What yields are doing

The yield on the 10-year Treasury note

fell to 2.908% from 2.932% at 3 p.m. Eastern on Friday. Yields and debt prices move opposite each other.

The 2-year Treasury note yield

was at 2.578%, down from 2.597% Friday afternoon.

The 30-year Treasury bond yield

was 3.089% down from 3.091%.

What’s driving the market

In data released on Monday, New York Empire State factory activity showed surprising weakness in May and plummeted 36.2 points to negative 11.6. Economists had expected a solid 16.5 reading, according to a survey by The Wall Street Journal.

Weak data from China also underscored worries about a demand slowdown, sending oil futures lower in the New York morning. China’s National Bureau of Statistics said that retail sales fell 11.1% on year in April, widening from a drop of 3.5% in March. Economists polled by The Wall Street Journal had looked for a 5.4% decline.

Yields had also retreated last week in volatile trading for stocks, bonds and cryptocurrencies. Some analysts have argue that yields may have peaked, at least for now, after a brutal selloff in 2022 that took the 10-year rate to a 3 1/2-year high above 3.2% in intraday trade early last week.

Others see the pullback as a mere respite. While inflation may have technically peaked, it continues to run near its hottest in more than 40 years — and the Federal Reserve appears intent on moving aggressively to contain rate pressures, analysts said.

What analysts say

The earliest that “US 10yr yields have peaked in the cycle, relative to Fed Funds, was four months in 2000 (January peak at 6.8%, May Fed Funds peak at 6.5%),” said Kit Juckes, strategist at Société Générale, in a note. “The past is only moderately useful when we try and figure out what the future brings, but I’d be surprised if we have seen the peak in U.S. yields; more likely, equities will find a base and as dip-buyers emerge, and we’ll get another sell-off in Treasurys.”

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