Treasurys rally as lingering trade jitters draw haven inflows

Treasury prices rose on Tuesday, pushing yields lower, as fear about U.S.-China trade negotiations resolving positively continued to unsettle investors, underpinning appetite for assets perceived as havens.

The 10-year Treasury yieldTMUBMUSD10Y, -0.36% retreated 2.5 basis points to 2.473%, near a more than three-week closing low. The 2-year note yieldTMUBMUSD02Y, -0.88% was down 1.8 basis points to 2.291%, while the 30-year bond yieldTMUBMUSD30Y, -0.51% fell 2.1 basis points to 2.886%, also near a three-week closing low. Bond prices move in the opposite direction of yields.

U.S. Trade Representative Robert Lighthizer said the Trump administration would increase tariffs on Chinese goods starting from Friday. This comes after President Donald Trump threatened to raise tariffs on Chinese imports, upending stock-markets in U.S. and Asia on Monday.

He and Treasury Secretary Steven Mnuchin suggested Beijing was retreating from “some of the language” that had been agreed upon in previous talks.

Futures for the S&P 500SPX, -0.45% and the DowDJIA, -0.25% showed U.S. equities were set to open lower on Tuesday, sparking demand for haven assets.

China’s Commerce Ministry said Vice Premier Liu He would visit Washington for trade talks on Thursday and Friday. Investors had been worried that if Liu He was missing from high-level trade talks in Washington this week, it might signal China’s lack of desire to pursue trade negotiations after Trump’s warning.

“Treasuries rallied late yesterday after US Trade Representative said out loud what had been suggested all day in Asian news reports: The US feels China backtracked on technology protections already agreed to in earlier talks, so tariffs are back on the table,” wrote Jim Vogel, an interest-rate strategist at FTN Financial.

The Reserve Bank of Australia said it would keep rates on hold at 1.50% on Tuesday, surprising investors who had expected a rate cut. The Australian 10-year government bond yieldTMBMKAU-10Y, +2.70% rose 4.6 basis points to 1.784%.

Separately, traders will later face an auction for $38 billion of 3-year notes. The bond-market can be influenced by debt sales as broker-dealers make room for the incoming supply.

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