US yields edge lower as risk appetite falls after weak China data

NEW YORK: US Treasury yields on most maturities slipped on Monday, in line with weakness in European bond markets, as global stocks fell due to weak Chinese trade data and soft euro zone numbers.

Yields on US 10-year and 2-year notes fell to one-week lows. US 30-year yields, however, were up slightly on the day.

"Treasuries opened with a little bid with the weak Chinese trade data, which prompted risk-off appetite," said Justin Lederer, fixed income director at Cantor Fitzgerald in New York.

"But there are other themes as well. Overall, we kind of found a range here. It doesn't seem like the markets want to stray too far from these levels until we get a feeling in which direction Treasuries go," he added.

Data from China showed imports fell 7.6 percent year-on-year in December, compared with market forecasts for a 5 percent rise. Exports dropped 4.4 percent, compared with expectations for a 3 percent gain. That started a sell-off in stocks.

Euro zone data also disappointed on Monday, as the region's industrial output fell in November by more than expected, dropping 1.7 percent after a modest, downwardly revised 0.1 percent increase in October and a 0.6 percent drop in September.

The European data, which pushed euro zone yields lower, was consistent with reports that raised concerns about the region's growth in the final quarter of the year.

Germany's 10-year government bond yield, the euro zone benchmark, fell two basis points to 0.214 percent lower on Friday's close, following the data.

In the United States, Treasuries tracked the European bond market.

In midmorning trading, US 10-year note yields fell to 2.693 percent from 2.699 percent late on Friday.

US 30-year bond yields, however, were up slightly at 3.04 percent from 3.036 percent on Friday.

On the short end of the curve, US 2-year yields traded lower at 2.528 percent, compared with Friday's 2.545 percent .

Analysts also expressed concern about the prolonged US government shutdown, which has also boosted Treasury prices overall. This has been the longest shutdown in US history.

"As the US government partial shutdown lengthens, prospects for market relief at its eventual conclusions are now dimmer," said Jim Vogel, interest rates strategist, at FTN Financial in Memphis, Tennessee.

"The more circular the arguments became last week, the clearer it became that the fight is about who is going to give in and why. Investors don't see real issues at stake other than those of opposing politicians."