US Treasurys rise in bid for safety after Trump cancels North Korea meeting

  • The meeting between the Trump and Kim would have been the first face-to-face encounter between a sitting U.S. president and a North Korean leader.
  • Yields also fell after minutes from the Federal Reserve's May meeting minutes revealed that central bankers would be comfortable allowing inflation to temporarily run above its target.

U.S. government debt prices rose, sending yields lower, on Thursday after President Donald Trump announced that he cancelled the hotly anticipated summit with North Korea's Kim Jong Un.

Yields also fell after minutes from the Federal Reserve's May meeting minutes revealed that central bankers would be comfortable allowing inflation to temporarily run above its 2 percent target.

The yield on the benchmark 10-year Treasury note, which moves inversely to price, fell to 2.977 percent, while the yield on the 30-year Treasury bond was lower at 3.128 percent.

The yield on the two-year note hit a fresh low of 2.496 percent, its lowest level since May 7, when the two-year note yielded as low as 2.493 percent.

The meeting between the Trump and Kim would have been the first face-to-face encounter between a sitting U.S. president and a North Korean leader.

"Sadly, based on the tremendous anger and open hostility displayed in your most recent statement, I feel it is inappropriate, at this time, to have this long-planned meeting," Trump wrote in the letter, which was released Thursday morning.

Stocks sold off swiftly following the announcement from the White House as investors pivoted to seemingly safer assets like bonds. The increase in debt prices was also spurred by Wednesday's news from the Federal Reserve.

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Following the May meeting, the policymaking arm of the Fed said it wasn't raising rates yet but added the word "symmetric" to describe its inflation goal. Until now, market participants have debated what that language meant.

Specifically, the minutes said "a temporary period of inflation modestly above 2 percent would be consistent with the Committee's symmetric inflation objective."

Though the general tone was that inflation would continue to rise, there was disagreement over how confident the Fed should be after undershooting its target for so long, with some members amenable to letting the prices climb higher.

"It's not like the Minutes were all that earth-shattering, but if you looked closely, you may have seen a bit of the hawkish tone get adjusted," wrote Kevin Giddis, head of fixed income capital markets at Raymond James.

"Regardless of what they say publicly, they don't want to see the yield curve invert, and they don't want to be the cause of a recession," he added. "What all of this means to the bond market is that the Fed may have blinked…a bit."

All signs continued to point at a tight labor market, with Thursday's data on new applications for U.S. unemployment rising just slightly to 234,000 for the week ended May 19.

The Treasury Department auctioned $30 billion in seven-year notes at a high yield of 2.93 percent. The bid-to-cover ratio, an indicator of demand, was 2.62. Indirect bidders, which include major central banks, were awarded 65.5 percent. Direct bidders, which includes domestic money managers, bought 12.9 percent.