US 10-year Treasury yields extend pullback from March top

• US 10-year Treasury yields print second day off losses after rising to the highest since March 20.
• China’s ban on Victorian timber logs, US warning over Hong Kong crackdown and virus woes weigh on the risk barometer.
• Vaccine hopes, expectations of no negative rates and further stimulus battle the bears.

Having recently pressed by the fresh challenges to risks, US 10-year Treasury yields drop five basis points (bps) to 0.94% during early Thursday. The bond coupon, mostly known as the risk barometer, extends Tuesday’s trading sentiment amid fears of a trade war and/or political tension concerning China.

After sanctioning four Chinese diplomats over the Hong Kong Security Bill, the US warns the dragon nation indirectly by showing readiness to punish those involved in restricting Hong Kong’s freedom.

While the dragon nation’s response to the comments from US National Security Adviser Robert O’Brien is awaited, its dislike for Australia offers an additional burden on the market’s risk tone. Beijing recently announced an indefinite ban on Victorian timber logs. The latest move follows the footsteps of the previous restrictions on Aussie wine, barley and iron ore imports.

It should be noted that the Reserve Bank of New Zealand’s (RBNZ) cautious optimism joins a slew of monetary policymakers to defy the negative rates, also support stimulus, which in turn combat the pessimism. Also on the positive side could be the vaccine hopes triggered by Pfizer and Moderna amid the heavy jump in the US coronavirus (COVID-19) numbers.

Other than the bond yields, US stock futures also keep intraday losses while shares in Asia-Pacific trim the early-day gains following the recent risk-off mood.

Looking forward, the US traders’ reaction to the latest risk catalyst on return from the holiday will be watched closely for fresh direction. Also likely to entertain the traders will be the US Consumer Price Index (CPI) and Jobless Claims data.

Also read: S&P 500 Futures eases below 3,600 amid fresh challenges