US 10-year Treasury yields retreat on Xi-Biden, stimulus chatters, US Retail Sales eyed

• US Treasury yields ease from three-week top, S&P 500 Futures print mild gains.
• Biden-Xi introductory talks emphasize need for cooperation, US Pres. Biden signals $1.0 trillion infrastructure bill.
• Fed rate hike concerns test bond buyers ahead of the US Retail Sales.

Early Tuesday’s market sentient could best be described as the cautious optimism as the US Treasury yields retreat but the stock futures print only mild gains ahead of the key data.

That being said, the US 10-year Treasury yields drop 1.5 basis points (bps) to 1.606% by the press time, following the jump to refresh a three-week top, whereas the S&P 500 Futures rise 0.11% intraday to 4,684 at the latest.

An absence of negative comments during the introductory talks between US President Joe Biden and his Chinese counterpart Xi Jinping seems to have underpinned the latest positive mood in the market. US President Biden said that US-China relation is profoundly important to the world. On the same line, China’s Xi mentioned, “Stands ready to move US-China relations forward in a positive direction”.

Additionally, US President Biden’s signing of the $1.0 trillion stimulus package and the hopes of overcoming the covid woes also contribute to the mildly positive sentiment.

Alternatively, firmer US Empire State Manufacturing Index for October and the multi-year high US inflation expectations follow the 31-year peak of the Consumer Price Index (CPI) to hint at the extended rush to the risk-safety amid fears of the Fed rate hike. The same highlights today’s US Retail Sales for October, expected to reprint the 0.7% MoM growth, for fresh impulse.

It should be noted that Richmond Federal Reserve Bank President Thomas Barkin recently said, “If ‘need is there’ fed will act to curb inflation, but good to have a few more months ‘to see where reality is,’” Per Reuters.

Given the US Retail Sales convey the impact of the surging prices on the customer spending, the risk appetite will worsen, which in turn will direct the traders towards the US bond selling, effectively fueling the treasury yields and weigh on equities.