U.S. bond yields rise as China contagion risks weighed

Equity markets weakened and U.S. Treasury yields rose as investors weighed the potential for policy action by Chinese regulators to address mounting financial and property risks.

U.S. stocks slipped after erasing a premarket gain on initially reassuring developments from China. Treasury yields ticked higher, with the policy sensitive two-year extending an advance into the fourth day to trade at 4.95 per cent.

Investors sitting on record first-half gains are having to contend with central bankers warning they are in no rush to cut interest rates.

“The timing of the first rate cut will begin to dominate the direction of U.S. yields,” said Ian Lyngen, a rates strategist at BMO Capital Markets. “That will not be today’s story however, and instead we anticipate Treasuries will be in wait and see mode ahead of tomorrow’s retail sales print.”