Overseas investors sold $300 billion of Treasurys in March

Overseas investors sold $299.3 billion of Treasurys during March’s bond-market rally, based on the latest Treasury International Capital report. Analysts said the liquidation of government bonds by overseas investors suggested banks and companies abroad were selling dollar-denominated assets to source greenbacks. The 10-year Treasury note yield TMUBMUSD10Y, 0.692%, fell to a record low of around 0.32%. The benchmark maturity finished at 0.64% on Friday. Bond price movement is in the opposite direction of yields. “As global markets melted down in March and corporations around the world drew down their revolving bank credit lines, demand for dollars soared,” said Thomas Simons, senior money market economist at Jefferies. Overall foreign holdings of Treasurys stood at $6.81 trillion in March, down from $7.07 trillion.

Treasury yields bounce off lows

 Treasury yields rose Friday, as the stock market shrugged off concerns about deflating economic data and U.S.-China tensions, but yields still ended the week on a lower point.

How Are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.694%, gained 2.3 basis points to 0.640%, beating its weekly drop to 3.9 basis points. The 2-year note yield TMUBMUSD02Y, 0.173% was virtually flat at 0.149% and showed little change. The 30-year bond yield TMUBMUSD30Y, 1.412%, gained 2.6 basis points to 1.320% but fell 6.4 basis points for this week.

What’s driving Treasurys?

Reports that the U.S. was moving to bar shipments of semiconductors to Huawei Technologies Co., the Chinese telecommunication giant, initially buoyed trading in haven assets such as government paper. Global Times editor Hu Xijin, who is believed to have close ties to the Chinese government, said China might retaliate if the U.S. prevents microchip shipments from Huawei.

The renewed worries about U.S.-China tensions rattled equities at the start of Friday, but the S&P 500 SPX, -1.04% and Dow Jones Industrial Average DJIA, -1.58% wiped out their losses to end higher in a volatile session, partly driven by the expiration of stock options.

Investors also observed the signs that the U.S. economy’s engine — consumer spending — had come to an end. Retail sales fell 16.4% in April, marking its highest collapse on record, as coronavirus-related lockdowns shuttered the economy’s swathes. Economists polled by MarketWatch had expected a 12.5% plunge.

Meanwhile, the Empire State business conditions index showed factory activity in New York State crashed to obtaining negative 48.5 this month, the second-lowest level on record.