Bond Report: Treasury yields rise as Turkey worries fade

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Treasury prices pulled back early Tuesday, pushing up yields, as haven-related demand surrounding Turkey’s currency crisis softened.

The yield on the 10-year Treasury note TMUBMUSD10Y, +0.41%  rose 1.8 basis points to 2.895%, while the 2-year Treasury yield TMUBMUSD02Y, +0.94%  was up 2.1 basis points at 2.633%. The yield on the 30-year Treasury bond TMUBMUSD30Y, +0.29%  rose 1.1 basis points to 3.056%. Yields and debt prices move in opposite directions.

Turkey is in the midst of a currency crisis that has seen the lira USDTRY, -7.5545% lose close to half of its value against the dollar in the past three months. Tensions between Washington and Ankara have added another twist to the ongoing currency saga after President Donald Trump last week authorized an increase in tariffs on aluminum and steel imports on Turkey.

See: Strategists see 4 ways out of Turkey’s currency crisis

Recent efforts to bridge the gulf between the two sides have helped ease pressure on the lira, while lifting Asian stocks and sapping appetite for investing havens like Treasurys. On Monday, National Security Adviser John Bolton met the Turkish ambassador to discuss the release of the American pastor Andrew Brunson, according to a White House statement.

“Treasury prices declined during the Tokyo session on perceived “risk-on” move on the back of U.S./Turkey White House meeting with National Security Adviser Bolton and a Turkish diplomat. There was apparently a discussion around the release of the American pastor and that the U.S. will not negotiate any tariffs until he is released,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.

On the data front, investors will look ahead to import prices data at 8:30 a.m. Eastern, which will give the latest read on inflation. In a sign that the U.S. economy has maintained its heady momentum, the combination of a tight labor market and expectations for increased sales helped to lift the NFIB Small Business Optimism Index 0.7 points to 107.9 in July, its second-highest level since the survey began 45 years ago.

Read: Why bond bulls aren’t scared by the strongest core inflation reading since 2008

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