Following the Fed downgraded its outlook for the U.S. economy last week, domestic and international fixed-income yields have been under pressure. Yields on both the German 10-year bund as well as the Japanese 10-year traded in negative territory Wednesday; Germany sold 10-year bunds with negative yields for the first time since 2016.
The Treasury Department auctioned $41 billion in 5-year notes at a high yield of 2.172 percent. The bid-to-cover ratio, an indicator of demand, was 2.35. Indirect bidders, which include major central banks, were awarded 59 percent. Direct bidders, which includes domestic money managers, bought 17.2 percent.
Yields initially came of their lows Wednesday morning after the Commerce Department said that the trade deficit between the U.S. and its global peers pulled back in January to $51.15 billion.
China in particular helped reduce the balance shortfall as the deficit between Washington and Beijing decrease to $33.2 billion. Economists polled by Dow Jones had expected the balance to fall to $57 billion. Though a cursory calculation might suggest a boon to U.S. output, Wizman added that the deficit reduction could also suggest softer U.S. demand.
“Because imports into the U.S. were weak, some people are reading as a sign of weakness. Yes, it’s conceivable straight math could add to the first-quarter GDP, but you don’t know how to infer the demand side of the economy,” he said.
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