Treasury yields pulled back on Friday as stocks across the world slipped on concerns over China’s economic slowdown.
The 10-year Treasury note yield TMUBMUSD10Y, -1.57% was down 3.3 basis points to 3.199%, while the 2-year note yield TMUBMUSD02Y, -1.51% fell 2.8 basis points to 2.941%. The 30-year bond yield TMUBMUSD30Y, -1.25% slipped 2.7 basis points to 3.398%. Bond prices move in the opposite direction of yields.
Asian stocks struggled over fears of slowing Chinese growth, following Beijing’s release of consumer price and producer price index data. The Nikkei 225 NIK, -1.05% and the Shanghai Composite SHCOMP, -1.39% both closed more than 1% lower. Meanwhile, the S&P 500 SPX, -1.34% was down 0.7%, and the Dow DJIA, -1.02% was on track to log a triple-digit loss.
The People’s Bank of China warned of “downward pressures” on the Chinese economy. This comes as Chinese financial watchdogs announced new initiatives to prop up growth, with the country’s banking regulator proposing lending targets to banks in a bid to drive credit to private businesses, an area of the economy long deprived of Beijing’s support.
See: China, Hong Kong lead Asian markets lower with financials under pressure
China Banking and Insurance Regulatory Commission Chairman Guo Shuqing said one third of new lending from larger banks should go to private firms, while two thirds of new lending from smaller banks should be diverted into the private sector, according to local news.
“While private companies need more help from the banks, the news is also reflective of the government response to an economy that continues to slow,” wrote Peter Boockvar, chief investment officer at the Bleakley Advisory Group.
As for U.S. data, wholesale prices for October surged 0.6%, well above the 0.2% expected from economists polled by MarketWatch. The University of Michigan’s consumer sentiment survey for November fell to 98.3 in November from 98.6 in October.
It’s unclear if higher producer prices will lead to inflationary pressures unless businesses will be able to pass down their costs to their customers. But with wages on the rise and consumer confidence high, companies may try to take advantage of the buoyant economic environment to raise prices.
European bond prices also rallied, with the exception of Italy and Greece. The 10-year German government bond yield TMBMKDE-10Y, -10.89% was down 4.1 basis points to 0.415%, while the 10-year Italian bond yield TMBMKIT-10Y, -0.04% was flat at 3.402%.
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