Treasury yields fall as Chinese data disappoints; traders look to Fed meeting

U.S. government debt yields fell on Friday as traders digested fresh economic data out of China and looked ahead to next week’s Federal Reserve meeting.

The yield on the benchmark 10-year Treasury note fell steeply to 2.895 percent, while the yield on the 30-year Treasury bond dropped to 3.152 percent. Bond yields move inversely to prices.

China’s industrial output in November grew 5.4 percent from the previous year, less than the 5.9 percent estimated by Reuters; retail sales, meanwhile, rose 8.1 percent last month, falling short of an expected 8.8 percent.

News of the disappointing figures comes as China and the U.S. try to negotiate a trade deal within a 90-day tariffs truce. Positive headlines around trade relations between the two had buoyed market sentiment earlier this week.

President Donald Trump said discussions with Beijing had been “very productive” and that some “important announcements” were forthcoming, while a Wall Street Journal report said China was preparing to widen foreign access to its economy.

Meanwhile, traders are anticipating the latest meeting of the Federal Open Market Committee (FOMC) next week, where the central bank sets interest rates. The Fed is largely expected to raise rates at the Dec. 18-19 meeting, however expectations for how many times — or if at all — the bank will hike rates next year have dampened amid worries around a potential slowdown in economic growth.

In other news, the European Central Bank on Thursday said it was to formally end its vast quantitative easing program. The institution will bring its bond purchases down from 15 billion euros per month to zero. The ECB, however, said it would continue to reinvest cash from maturing bonds for an extended period of time.

On the data front, investors are likely to closely monitor retail sales figures for November at around 8:30 a.m. ET. Industrial production data for November and manufacturing and services PMI data for December is scheduled to follow later in the session.

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