NEW YORK- Longer-dated US Treasury yields fell on Tuesday after Moody’s Investors Service cut its credit ratings on several small- to mid-sized US banks, and China’s imports and exports fell much faster than expected in July, raising expectations for additional Chinese government stimulus.
Moody’s also said it may downgrade some of the nation’s biggest lenders, warning that the banking sector’s credit strength will likely be tested by funding risks and weaker profitability.
China’s data, meanwhile, threatens growth prospects in the world’s second-largest economy and heightens pressure for the government to provide fresh stimulus to prop up demand.
Moody’s rating action and the Chinese trade data “contributed to a bit of demand here for Treasuries,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.
The next focus will be whether the US Treasury Department sees strong demand for $103 billion in coupon-bearing supply this week. Interest was solid for the $42 billion sale of three-year Treasury notes on Tuesday.
The notes sold at a high yield of 4.398 percent , almost two basis points below where they traded before the auction. Demand was 2.90 times the amount on offer, the highest since May. – Reuters
