US yields rise as stocks advance on Huawei news
US Treasury yields edged higher, lifted by gains in Wall Street shares and higher risk appetite overall after the United States eased trade restrictions on Chinese telecommunications equipment maker Huawei Technologies.
The move was a step in the right direction in terms of calming escalating trade tensions between the United States and China, analysts said.
The United States temporarily eased trade restrictions on China's Huawei to minimize disruption for its customers. The US Commerce Department blocked Huawei from buying US goods last week, saying the firm was involved in activities contrary to national security.
Yields on US benchmark 10-year notes and 30-year bonds rose to one-week highs, while those on two-year notes hit two-week peaks.
"This is partly optimism in equities causing a reversal of the moves we saw last week," said Subadra Rajappa, head of US rates strategy at Societe Generale in New York, as well as a reduction in the markets' rate cut forecasts.
"There's optimism about progress in the ongoing USChina trade talks," she added.
In mid-morning trading, US 10-year note yields rose to 2.426pc, up from 2.414pc, after earlier hitting a one-week high of 2.435pc. Yields on US 30year bonds advanced as well to 2.842pc , up from 2.835pc. Earlier in the session, 30-year yields touched one-week highs of 2.849pc. On the short end of the curve, US 2-year yields were up at 2.245pc, compared with Monday's 2.223pc.
US yields, however, briefly slipped after US home sales unexpectedly fell in April amid persistent weakness in the lower-priced segment of the market. The National Association of Realtors said existing home sales fell 0.4pc to a seasonally-adjusted annual rate of 5.19 million units last month. March's sales pace was unrevised at 5.21 million units.
But Jon Hill, US rates strategist at BMO Capital Markets in New York, said details of the housing report showed a much healthier picture. He cited gains in condominium and co-op sales and smaller declines in existing home sales compared to the previous month.
"All in all, another solid read on the housing market that is consistent with the narrative of stabilization, rebound in the sector," he said.
The Dow Jones Industrial Average DJIA, +0.77% rose 197.43 points, or 0.8%, to 25,877.33, while the S&P 500 index SPX, +0.85% gained 24.13 points, or 0.9%, to 2,864.36. The Nasdaq Composite Index COMP, +1.08% gained 83,35 points, or 1.1%, to 7,785.72.
Stock buying returned to markets after technology sector losses. losses Monday concentrated in the Shares of chip makers bore the brunt of declines after technology companies in the U.S. and elsewhere said they have started to comply with the White House's ban on China's Huawei Technologies Inc.
U.S. officials said late Monday they would offer some temporary exceptions to an export blacklist against Huawei Technologies Co., which will provide some suppliers and customers of China's telecom giant a 90-day reprieve from tough trade penalties - a move that appeared to soothe investor anxiety somewhat.
However, the rhetoric didn't let up as the chief executive of Huawei, Ren Zhengfei, fired back against the blacklist for his company, saying the U.S. government is underestimating how powerful his company will be in 5G in a few years. He also said the company has been stockpiling chips, and, therefore, is well prepared for that ban.