The US 10-year Treasury is eyeing its best week in nearly two months after concerns over trade drew investors back to haven assets over recent sessions.
The yield on the 10-year was down 8.3 basis points for the week to 2.3838 per cent — eyeing its biggest weekly drop since March 22. Yields move inversely to price.
Meanwhile, the two-year is down 8.4 basis points for the week to 2.182 per cent but on track for its biggest such drop in about three weeks.
Treasuries began their rally at the start of the week when China hit back at Washington with its own retaliatory tariffs. Beijing said it would raise tariffs on $60bn of American goods, following the US’s move on Friday to increase tariffs on $200bn in Chinese imports to 25 per cent with a threat to raise duties on further goods.
The escalation in the trade war between the world’s two largest economies spooked investors and prompted a rush to so-called haven assets at the start of the week. The so-called yield curve remained inverted earlier this week, with yields on short-dated 3-month T-bills higher than those on 10-year Treasuries. Inverted yield curves have preceded every recession since World War II.
A soft batch of US economic data also helped drive up demand for Treasuries on Wednesday and sent short-dated yields to their lowest level in more than a year.
However, as the Trump administration on Wednesday deferred a decision on auto tariffs and concerns about trade began to recede, investors’ risk appetite returned. Yields were little changed at pixel time on Friday.
The cautious tone in markets helped gold prices jump 1 per cent on Monday, but for the week the precious metal was down about 0.7 per cent. Meanwhile, the Japanese yen, another so-called haven asset that strengthened 0.6 per cent on Monday, was little change for the week.