Bond Report: U.S. Treasury yields slide after weak German economic data

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U.S. Treasury yields fell early Monday in line with European bond markets after data in Germany pointed to deterioration in the eurozone economy, hinting at the possibility of a double-dip recession.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 1.066% fell 2.2 basis points to 1.069%, while the 2-year note rate TMUBMUSD02Y, 0.125% edged 0.2 basis point down to 0.186%. The 30-year bond yield TMUBMUSD30Y, 1.818% slid 3.7 basis points to 1.819%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

The travails of the world’s largest economy in the eurozone drew the attention of bond traders, dragging down government debt yields in the U.S. and Europe.

The German Ifo index tracking business sentiment dropped to 90.1, marking its lowest level since June, from 92.1 in December.

Last week, purchasing manager surveys from the eurozone indicated a pullback in industrial activity in both the services and manufacturing sector. COVID-19 restrictions put in place at the turn of the year have hamstrung the recoveries of European states.

Meanwhile, the Treasury Department will also sell $183 billion of notes through 2-year, 5-year and 7-year maturities this week.

What did market participants say?

“With the current lockdown measures in place until mid-February and no significant easing in the offing immediately afterward, the short-term outlook for the German economy is anything but rosy,” said Carsten Brzeski, head of global macro for ING.

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