By Sunny Oh
Traders return from holiday weekend with a rally in Treasurys
Treasury yields retreated on Tuesday, paring last week's sharp climb, as fears about growth came to the fore after China reported its slowest economic expansion in nearly three decades and the International Monetary Fund lowered its global economic forecast.
The 10-year Treasury yield fell 5.1 basis points to 2.732%. The 2-year note yield was down 3.5 basis points to 2.576%, while the 30-year bond yield slipped 4.1 basis points to 3.054%. Bond prices move in the opposite direction of yields.
China's economy grew 6.6% in 2018 , its slowest pace in 28 years. Also, the International Monetary Fund cut its global growth rates for 2019 to 3.5% from 3.7%, amid concerns the second largest economy in the world was struggling to prevent growth from sliding further even after implementing several rounds of stimulus. Chinese President Xi Jinping told top officials to remain wary of risks to the economy .
"The major risk is that fragile markets feed through into the real economy through weaker economic fundamentals, posing substantial downside risks to our global growth and monetary policy forecasts," said analysts at Fitch Solutions.
Adding to the growth jitters, trade negotiations appeared to take a step back after the U.S. rejected China's offer to meet this week for trade talks because of a lack of progress over intellectual property issues, according to the Financial Times (paywall) (https://www.ft.com/content/466cc9e2-1e4c-11e9-b126-46fc3ad87c65). White House economic adviser Larry Kudlow later denied reports of a canceled meeting.
The S&P and the Dow Jones Industrial Averagewere down sharply on Tuesday , boosting demand for haven assets like U.S. government paper. Market participants also said last week's bond-market selloff had helped cheapen up Treasurys, pushing yields high enough to attract interest from traders.
"Investors are showing a willingness to diversify at 2.70% on the 10-year," said Arnim Holzer, portfolio manager at EAB Investment Group.
On the data front, existing home sales for December ran at annual pace of 4.99 million , a three-year low. Economists polled by MarketWatch had forecast an annualized reading of 5.10 million.