U.S. Treasury Yields Under Pressure as Weakening China Threatens Global Stability

October 18, 2019 20:30 UTC

U.S. government debt yields fell on Friday, as bond prices rose following news of China’s weakest quarter of economic expansion in three decades.

Treasury Yields Fall

The yield curve declined at week’s end, reflecting growing appetite for U.S. Treasurys and other haven assets. The yield on the benchmark 10-year Treasury note reached a low of 1.73%, according to CNBC data. It was last seen hovering at 1.752%, where it was little changed.

The 10-year U.S. Treasury yield reached an intraday low of 1.73% on Friday. | Chart: CNBC

The 2-year Treasury note saw its yield fall to a low of 1.56%. It would later recover at 1.578%, down just over 2 basis points.

Yields jumped to three-week highs on Thursday after the United Kingdom and European Union agreed on a draft Brexit deal that paves the way for Britain’s eventual withdrawal from the bloc.

China’s Economy: The Long Unwind Continues

China’s fall from grace as the world’s fastest-growing economy intensified last quarter, with gross domestic product (GDP) expanding at its slowest pace in nearly three decades.

China’s GDP grew just 6% annually in the third quarter, slightly below forecasts and the weakest rate since 1992, the National Bureau of Statistics reported Friday.

There’s some optimism that the recently announced ‘phase one’ trade agreement between Washington and Beijing will help Chinese factories get back on track following a disastrous six-month stretch, but it’s clear from the latest figures that China’s economy remains in a firm downtrend. That trend began many years before the trade war, and partly reflects Beijing’s ambitions to become a consumer-driven economy that doesn’t rely on traditional smokestack industries.

Still, a weaker China doesn’t bode well for a global economy showing very little upside. Japan and several European countries are flirting with recession, and there’s little signs that a partial trade agreement between the U.S. and China will have much of an impact.

The International Monetary Fund (IMF) believes that tariffs already imposed or announced can sink global GDP by up to 0.8% next year. “That’s equivalent to the whole economy of Switzerland,” Kristalina Georgieva, the IMF’s new managing director, told CNBC Thursday.

This article was edited by Josiah Wilmoth.

Last modified: October 18, 2019 20:14 UTC

@hsbourgi

Financial Editor to CCN Markets, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi. Sam is based in Ontario, Canada and can be contacted at sam.bourgi@ccn.com