Treasury prices fell, pushing yields higher, on Thursday, a day after fears sparked by a fresh round of tariffs from Trump administration had fueled buying in assets perceived as havens.
The two-year Treasury note yield
edged 1.6 basis points higher at 2.594%, retouching its loftiest rate since late July 2008, according to WSJ Market Data Group.
In main focus for bond traders, however, will be a key report on inflation, which could help provide clues about the Federal Reserve’s plan for rate increases in the next six months of 2018.
Inflation data for June are due at 8:30 a.m. Eastern Time, with consensus for consumer prices to have risen 0.2% month-on-month in June, based on economists polled by MarketWatch.
Analysts at UniCredit in a Thursday note said the “headline inflation rate is likely to accelerate to 3.0% from 2.8% [year-over-year]. This would be the highest inflation rate since late 2011.”’
That report comes a day after the producer-price index, which measures prices that businesses receive for their goods and services, rose 0.3%, above the 0.2% expected from economists polled by MarketWatch.
Rising inflation can chip away a bond’s fixed value and provide some impetus for Fed policy makers to quicken their pace of rate increases. Both are factors that might drive debt prices lower and yields higher.
Separately, a report on weekly jobless claims also is due at 8:30 a.m., with forecast for claims at 226,000.
Later, at 10:30 a.m., Philadelphia Fed President Patrick Harker is due to take part in a discussion at an event in Idaho, and the Treasury Department is slated release its June figures on the federal budget for June at 2 p.m.
Meanwhile, bond traders await an auction of about $14 billion in 30-year paper set for $1 p.m., as a part of some $69 billion in government-bond sales slated for this week.
Concerns over trade tensions linger, however, and the flight to safety assets like government bonds has moderated, with global stocks, including the Dow Jones Industrial Average
and the S&P 500 index
poised to mount a rally Thursday.
Late Tuesday, the Trump administration said it would assess additional tariffs on $200 billion on a variety of Chinese goods, including bicycles, sound systems, refrigerators, pocketbooks, vacuum cleaners, cosmetics, tools and seafood.
Those tariffs follow $34 billion in duties of 25% enacted against Beijing and Washington last week, with China vowing to respond in kind to the latest $200 billion salvo.
Haven assets, including the dollar
have drawn bidding because markets fret that the trade clash between the U.S. and its partners across the world could hurt global economic expansion.
Many industry participants, however, hold out hope that trade disputes can be resolved amicably. Bloomberg reported that U.S. and Chinese officials are open to resuming high-level trade talks.