2-year Treasury note yield slides below 200-day moving average as stocks plunge


Treasury prices rose, pushing yields sharply lower, on Monday to start off the holiday-truncated week as investors jumped into the perceived safety of government paper after stocks slumped on political developments emanating from out of Washington.

Reports said President Donald Trump had mooted firing Federal Reserve Chairman Jerome Powell, and that Treasury Secretary Steven Mnuchin had convened a call with U.S. bank CEOs about market liquidity.

The 2-year Treasury note yield

TMUBMUSD02Y, -3.02%

 slumped 8.2 basis points to 2.740%, a 5-month low. The short-dated maturity fell below its 200-day moving average at 2.612%. Moving averages are regarded by market technicians as measures of an asset’s bullish and bearish momentum. Falling below the charting level may have added fuel to the 2-year’s slide on Monday’s session.

The 10-year Treasury note yield

TMUBMUSD10Y, -1.51%

 slipped 5.2 basis points to 2.740%, a more than 8-month low, while the 30-year bond yield

TMUBMUSD30Y, -1.16%

 slipped 2.9 basis points to 2.996%, a four-month low.

Bond prices move in the opposite direction of yields.

Fixed-income markets closed at 2 p.m. Eastern on Monday a day before Christmas, on the recommendation of the Securities Industry and Financial Markets Association. Major equity and bond markets will be closed on Christmas Tuesday.

Coloring trading sentiment on the day were reports that President Donald Trump discussed firing Fed boss Powell after the most recent rate increase by the central bank, though officials denied that the president had threatened to oust the Fed’s No. 1. Trump tweeted that the only problem for the U.S. economy now was the central bank, following up on previous tweets stating that the Fed’s quarter percentage point hike in December was a mistake.

It isn’t clear if Trump has legal authority to fire Powell under the Federal Reserve Act, and whether he could garner support from Congress to push for his ouster.

“If Trump tries to remove Powell, it could throw the financial markets into deep chaos that makes the current market turmoil look tame,” wrote Kathy Bostjancic, head U.S. financial markets economist at Oxford Economics.

Investors bought up Treasurys to take shelter from the worst stock market selloff on Christmas Eve ever. The S&P 500

SPX, -2.71%

ended at its lowest level since April 2017, while the Dow Jones Industrial Average

DJIA, -2.91%

finished at its lowest since around September of 2017.

Mnuchin had called CEOs of banks to ensure there was adequate liquidity in financial markets. A senior Treasury official later told CNBC that the Treasury wasn’t worried about liquidity when Mnuchin made the calls.

Though, Mnuchin’s move appeared to be aimed at allaying investors’ concerns over the recent downdraft in stocks, some said it may have backfired and ended up heightening market jitters as previous efforts to confirm sufficient liquidity among the nation’s financial institutions recalled the 2008 financial crisis.

“At some point, the constant White House messaging on the Fed could outweigh markets’ positive sentiment on any decision by the Fed to pause sometime in the first quarter,” said Jim Vogel, an interest-rate strategist for FTN Financial, in a Monday note.

See: Treasury Department’s odd attempt to reassure investors may have just backfired

Adding to the bearish sentiment from Washington, the federal government is mired in a partial government shutdown after Trump refused to sign a short-term budget extension. White House budget director Mick Mulvaney said the shutdown could last into 2019, in a television interview with Fox News.

Source : MTV