Treasuries Move Higher Amid Geopolitical Concerns

Trading 06 mar 2019 Donner votre avis

After ending the previous session roughly flat, treasuries showed a moderate move the upside during the trading day on Wednesday.

Bond prices pulled back off their best levels in afternoon trading but remained firmly positive. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped 3 basis points to 2.692 percent.

Treasuries initially benefited from geopolitical concerns after a U.S. think tank said analysis of new satellite images of activity at a North Korean long-range rocket site suggests Pyongyang may be rapidly rebuilding the test facility that it pledged to dismantle.

The Center for Strategic and International Studies said the images were taken two days after the second summit between President Donald Trump and North Korean leader Kim Jong Un ended without an agreement late last month.

The two leaders cut short their discussions after Kim's request for a full withdrawal of sanctions in return for the communist country's willingness to abandon nuclear weapons was rejected.

Treasuries saw further upside after a report from payroll processor ADP showed U.S. private sector job growth slowed in February after an upwardly revised spike in January.

ADP said private sector employment increased by 183,000 jobs in February after soaring by an upwardly revised 300,000 jobs in January.

Economists had expected employment to climb by 189,000 jobs compared to the addition of 213,000 jobs originally reported for the previous month.

"The economy has throttled back and so too has job growth," said Mark Zandi, chief economist of Moody's Analytics. "Job gains are still strong, but they have likely seen their high watermark for this expansion."

A separate report from the Commerce Department showed the U.S. trade deficit widened by more than anticipated in December, as imports jumped and exports slumped.

The Commerce Department said the trade deficit widened to $59.8 billion in December from a revised $50.3 billion in November. Economists had expected the deficit to widen to $57.9 billion.

The substantial monthly increase drove the U.S. trade deficit to its highest level since reaching $60.2 billion in October of 2008.

The trade deficit for 2018 was also the biggest since 2008, widening to $621.0 billion from $552.3 billion in 2017 as Trump ramped up his trade war with China.

The release of the trade data comes amid lingering uncertainty about ongoing trade talks between the U.S. and China and the potential for a long-term deal.

However, treasuries gave back some ground after the Federal Reserve's Beige Book said economic activity continued to expand in late January and February.

The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, said ten districts reported slight-to-moderate growth, although Philadelphia and St. Louis reported flat economic conditions.

The Fed noted the prolonged partial government shutdown led to slower economic activity in about half of the districts.

Reports on weekly jobless claims and labor productivity and costs may attract some attention on Thursday, although trading activity is likely to be subdued ahead of the release of the closely watched monthly jobs report on Friday.

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