U.S. Government-Bond Yields Drop as Trade Tensions Escalate

Government-bond yields fell Monday to fresh 2019 lows after new trade tensions between the U.S. and China exacerbated concerns about slowing economic growth.

The yield on the benchmark 10-year U.S. Treasury note dropped to a recent 1.762%, its lowest intraday level since October 2016, according to Tradeweb, from 1.864% Friday.

Bond yields, which fall as prices rise, dropped around the world and major stock indexes declined from New York to Hong Kong, a reflection of growing concern about the longevity of the expansion amid mounting trade frictions.

The Chinese yuan fell below 7 per dollar and hit a record low in offshore trading, with President Trump on Twitter accusing China of manipulating its currency on Monday. The WSJ Dollar Index, which measures the U.S. currency against 16 others, recently fell 0.2%.

Traders working at the New York Stock Exchange on Monday. Bond yields and stocks fell as trade threats between Beijing and Washington raised fears of an economic slowdown.


johannes eisele/Agence France-Presse/Getty Images

“Are you listening Federal Reserve?” Mr. Trump tweeted. The President has previously called on the Fed to cut interest rates to weaken the dollar in response to perceptions that other central banks are weakening their own currencies.

Investors rush into bonds drove the yield on three-month Treasurys further above the yield on 10-year Treasurys to its widest margin since the financial crisis. Investors watch the gap closely because shorter-term yields typically exceed longer-term ones ahead of recessions, a phenomenon known as an inverted yield curve.

There have been discouraging headlines related to U.S.-China trade relations in the past, “but this time it feels a little worse,” said Larry Milstein, head of Treasury and agency trading at R.W. Pressprich & Co. “It doesn’t seem like there’s a way out.”

Write to Daniel Kruger at Daniel.Kruger@wsj.com

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