Disappointing Chinese Export Data Reignites Concern Over the Global Economy

Global equity markets declined while Treasuries rallied sharply across the curve after disappointing Chinese trade data renewed concerns over the health of the world’s second largest economy.  The report showed both Chinese imports and exports experienced sharp declines in February.  The drop in imports can be partially explained by weaker commodity prices, but the sharp decline in exports is of greater fundamental concern.  Exports fell 25.4% from a year earlier, more than double the 12.5% decline economists were projecting, and the largest YoY fall in over six years.  The weak trade performance comes just days after top Chinese officials met in an effort to reassure investors over the growth prospects for the economy in 2016.

A strong rally in Japanese government bonds also spilled over to robust demand for US Treasuries as well.  Japanese yields fell to a record low after a 30-year auction drew the strongest demand in nearly two years.  Yields on Japan’s 30-year sovereign debt plunged 22 basis points, falling to 0.475%, while 10-year yields extended their push negative, falling below -0.10%.  The strong bid for Japanese government debt carried over into US markets, as investors compared the higher relative value.  10-year Treasuries are currently trading at 1.82%, rallying about 9 bps from yesterday’s close.

There are no significant US data releases today and no scheduled Fed speakers with the black-out period in effect ahead of next week’s FOMC meeting.  There is a $24 billion 3-year note auction at 1pm ET.  All three major US stock indexes are currently trading in negative territory down less than 1% each, while Treasury yields and swap rates are down 5-9 bps in a bull flattening pattern.