After an early move to the upside, treasuries moved modestly lower over the course of the trading session on Monday.
Bond prices pulled back off their early highs and into negative territory, although selling pressure was somewhat subdued. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.2 basis points to 3.703 percent.
The downturn by treasuries came as traders kept an eye on the latest developments in China, as widespread protests against the Beijing’s zero-Covid policy broke out over the weekend.
A recent surge in new Covid cases in China has led officials to impose new restrictions in several major cities, dashing hopes the world’s second-largest economy was on the way toward easing curbs.
Craig Erlam, senior market analyst at OANDA, said the protests “highlight how increasingly frustrated the public is becoming with the leadership’s zero-Covid policy.”
“Record cases across multiple cities are putting the policy to the test and the unrest highlights the enormity of the challenge facing President Xi Jinping and his commitment to zero-Covid,” Erlam said.
He added, “The combination of these creates huge uncertainty, both in terms of how the protests are handled and what the whole experience means for the future of the policy and the economy.”
Traders were also looking to the release of some key economic data in the coming days, including the Labor Department’s closely watched monthly jobs report on Friday.
Following a quiet day on the U.S. economic front, trading on Tuesday may be impacted by reaction to reports on home prices and consumer confidence.