Global markets rocked by escalating trade wars

Global markets rocked by escalating trade wars 2

Markets are in disarray since yesterday’s announcement of new tariffs on Chinese imports.

Yields on US Treasuries are slipping in response to the renewed uncertainty about trade. There are a few reasons for that.

First, bond yields track future interest rate expectations.

A continued trade conflict with China will keep business investment suppressed in the United States, which could weigh on economic growth. The new tariffs are also targeting consumer goods like toys and apparel at a time when the American consumer has been a strong driver of GDP growth. This could mean that the Federal Reserve will be more inclined to cut interest rates again in September to boost the economy.

Second, US Treasuries are a safe haven investment.

In times of market turmoil, investors turn to America’s government bonds. With more demand, prices rise and yields fall.

Today the yield on 10-year Treasuries hit a level not seen since November 2016. It last stood at 1.8640%.

Source >>> Originally published at here

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