US Treasury yields stay firmer at early 2020 levels, Chinese bond coupons refresh multi-day low

• US 10-year, 5-year T-bond yields poke January 2020 tops, 2-year coupons remain sturdy around 22-month high.
• China’s 10-year Treasury yields drop to fresh low since June 2020.
• Stock futures refrain from tracking Wall Street losses amid sluggish sessions.
• Geopolitics, Omicron will join US housing data to also direct market moves.

Market sentiment dwindles during early Wednesday, following the heavy risk-off day, as Fed hawks seek confirmation of the previously hawkish bias from the Fed during a non-event Asian session.

That said, the US 10-year Treasury yields rose 1.5 basis points (bps) to 1.88% after refreshing the two-year top to 1.89% during the early Asian session. Coupons of the other key US bond variants, like 2-year and 5-year, also renewed multi-day peaks during the early Asian session during the four-day uptrend before recently grinding higher.

On the other hand, 10-year Treasury yields of China government bonds dropped to the fresh low since June 2020, around 2.733% by the press time, after the People’s Bank of China (PBOC) official cited readiness to act.

“China's central bank will roll out more policy measures to stabilize the economy and move ahead of the market curve as downward pressure persists,” People’s Bank of China (PBOC) Vice Governor Liu Guoqiang said on Tuesday per Reuters.

With this, the US-China 10-year bond coupon spread turns narrowest since 2019.

It’s worth observing that the virus-led deaths are gradually rising and the geopolitical tension between Russia and Ukraine also escalates of late, which in turn weighs on the US stock futures and Asia-Pacific equities.

Even so, major attention is given to the Fed’s rate hikes as markets await the next week’s Federal Open Market Committee (FOMC) verdict. Per the latest data, the Fed rate is likely to cross the 1.0% threshold during early 2023, which n turn favor yields and the US dollar. As a result, commodities and Antipodeans have additional downside to trace.

Read: FX risk aversion intensifies as yields hit pre-covid highs