Bond Report: Treasury yields pull back slightly as investors focus on economy

U.S. Treasurys saw some cautious buying on Tuesday, pushing yields lower, a day after President Donald Trump signed legislation to temporarily end a multiday, partial shutdown of the government.

Meanwhile, the Bank of Japan left its monetary policy unchanged, as expected, as Gov. Haruhiko Kuroda attempted to tamp down speculation that the central bank may follow the European Central Bank and the Federal Reserve by adopting a more hawkish monetary policy.

What are Treasury yields doing?

The yield for the 10-year benchmark Treasury note TMUBMUSD10Y, -1.18%  was down 3.4 basis points to 2.629%, the 2-year note yield TMUBMUSD02Y, -0.39% was down 0.8 basis point at 2.062%, threatening to end a 14-day streak of yield gains. The 30-year bond yield TMUBMUSD30Y, -0.92% gave up 3.1 basis points, retreating from its highest close in three months, to 2.896%.

Bond prices and yields move in the opposite directions.

What are driving bond markets?

Congress passed a three-week funding measure halting a three-day shutdown, with the bill then signed by President Donald Trump. The agreement keeps the government running up to Feb. 8, though underlying disagreements between the Republicans and the Democrats on immigration and other topics remain.

The BOJ voted 8-1 to maintain its target for 10-year Japanese government bond yields at around zero and its short-term deposit rate at minus 0.1%. BOJ Gov. Kuroda also signaled that sluggish inflation in Japan was flat rather than “weakening”. which helped the yen USDJPY, -0.49% strengthen against the dollar to ¥110.50. Still, the Japanese central bank said it was still too early to discuss scaling back its easy-money policy stance, as investors have been speculating.

The White House on Thursday announced tariffs on imports of washing machines and solar panels, aimed mainly at Asian producers, which could stoke further fears of a trade conflicts.

Looking ahead, bond traders will focus on the European Central Bank’s policy update on Thursday, which could offer further signs about the central bank’s accommodative stance.

What are other markets doing?

Japanese 10-year bond yields TMBMKJP-10Y, -10.15%  were little changed holding at 0.069%, compared with 0.68%, according to FactSet data.

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