Yields Rise as China Eases Quarantine Policies

Treasurys sell-off, and equities decline. Treasury yields rose across the curve today, the 2-year yield increasing 5bps and the 10-year yield rising 9bps to 3.84%, its highest level since mid-November. The move came after China announced an easing of COVID isolation measures, while U.S. wholesale inventories came in at 1%, exceeding the expected level of 0.3%. Elsewhere, equities were generally down today. The S&P 500 fell 0.41%, and NASDAQ closed down 1.38%.

China eases COVID restrictions. Chinese officials announced that the country will reopen its border to international travel for the first time in three years and end the requirement that all arrivals to the country quarantine. Airline tickets to travel out of the country soared immediately following the news. China is also ending its previous heavy quarantine requirements for individuals with COVID. China’s previous zero-tolerance policy for COVID is believed to have been a key contributor to supply chain issues. Markets participants are hopeful that an open China will steady the global economy and help moderate global inflation.

Day ahead. The Federal Reserve Bank of Richmond will release the results of its monthly survey of manufacturing firms, where the market is anticipating a decline in manufacturing activity last month. Additionally, the National Association of Realtors will announce the latest reading for its pending homes sales index, a leading indicator for housing activity. The market is anticipating a decline in pending home sales, as well.