Bond Report: Treasury yields remain steady despite global stock selloff

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Treasury yields held their ground on Tuesday eve as stocks across the world came under pressure, prompted by concerns over a persistent decline in once-highflying U.S. tech companies and waning global growth.

The 10-year Treasury note yield TMUBMUSD10Y, -0.21% was down 0.9 basis point to 3.050%, after it touched a six-week low on Monday. The 30-year bond yield TMUBMUSD30Y, -0.12% fell 1.2 basis point to 3.305%, while the 2-year note yield TMUBMUSD02Y, +0.59% was up 1.2 basis points to 2.798%.

Yields struggled to gain traction as U.S. and Asian stocks came under pressure. The S&P 500 SPX, -1.82% and Dow Jones Industrial Average DJIA, -2.21% ended Tuesday trade negative for the year, while the Shanghai Composite Index SHCOMP, -2.13% and Hang Seng Index HSI, -9.09% finished their sessions more than 2% lower.

“Equity prices are showing growing concerns about an economic slowdown as tariffs start to have an actual impact on the bottom lines of U.S. tech companies,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors.

The global stock selloff extended the bout of weakness on Monday, after Apple Inc. AAPL, -4.78% and other tech firms were hit by reports of oversupply issues in the semiconductor industry and tepid demand for high-tech products, fueling fears that tariffs could be weighing on global growth and U.S. supply chains. Investors will also look forward to President Donald Trump’s meeting with China’s leader Xi Jinping later in the month when the pair will attempt to broker a trade resolution.

Analysts say bond markets aren’t see more investors flocking to havens as the Federal Reserve remains intent on raising rates. Though Fed Chairman Jerome Powell highlighted global growth concerns last week, he repeated his plans to steadily raise rates against the U.S.’s healthy economic backdrop.

“The latest bond sentiment refuses to give into the equity rout, still bound to the Fed’s core message about 2019,” wrote Jim Vogel, an interest-rate strategist at FTN Financial.

See: Software stocks experience worst selloff in nearly 3 years as tech continues to get beaten up

Opinion: The chip slowdown is real, but how bad will it be?

Elsewhere, market participants monitored the budget clash between Rome and Brussels. Italian Deputy Prime Minister Luigi di Maio said a resolution to negotiations with the European Commission over the 2019 budget could be reached, but the main measures in the outline should be left intact, Reuters reported. Economy Minister Giovanni Tria said on Monday Rome would keep its budget plan.

The 10-year Italian government bond yield TMBMKIT-10Y, +0.59% was up 3.1 basis points to 3.621%, after touching an intraday high of 3.719%. That left the all-important spread between the 10-year Italian yield and the 10-year German yield TMBMKDE-10Y, -5.93% at 3.27 percentage points, near its widest levels in five years. The German 10-year yield TMBMKDE-10Y, -5.93% was down 1.9 basis points to 0.353%.

Read: Italy faces showdown with EU after refusing to revise budget

As for data, housing starts for October rose 1.5% to a seasonally adjusted annual rate of 1.228 million, which nonetheless was below 2.9% from a year ago. This comes after the National Association of Home Builder’s confidence gauge plunged 8 points to 60 in November, the biggest monthly slump since 2014. Analysts have closely tracked signs of weakness in the housing industry as it could signal trouble ahead for the broader economy.

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