U.S. Government Bond Yields Slide Further

A rally in U.S. government bonds resumed on Monday, pushing yields back to multiyear lows, as global political uncertainty further stoked investors’ economic anxieties.

The yield on the benchmark 10-year U.S. Treasury note settled at 1.640%, its lowest close since October 2016, compared with 1.731% Friday.

Yields, which fall when bond prices rise, have dropped sharply in August, driven largely by worries about global growth and signs that central banks across the world are racing to cut interest rates.

On Monday, they slid further as investors responded to disappointing Chinese economic data and wide-ranging political developments. Those included a setback for Argentina’s pro-business president, which sent the Argentine peso tumbling, and mounting tensions between Chinese authorities and Hong Kong protesters, which led to a shutdown of Hong Kong’s airport.

The Federal Reserve building in Washington.


brendan mcdermid/Reuters

Treasurys often benefit from political and economic uncertainty because they offer steady interest payments with essentially no risk of nonpayment.

“The visuals are getting uglier as opposed to calming,” said Gary Pollack, head of fixed-income trading at

Deutsche Bank

’s private wealth management unit. “All of this feeds into the psyche of slower economic growth.”

After dropping below 1.7%, the 10-year yield perked up a bit at the end of last week. Still, many investors are unsure what could drive it much higher absent a surprise breakthrough in U.S.-China trade negotiations or significant improvement in economic data.

To that end, investors will be closely attuned to U.S. economic reports this week, including consumer-price-index data on Tuesday and retail-sales numbers on Thursday.

Economists surveyed by The Wall Street Journal anticipate that consumer prices excluding volatile food and energy categories rose 0.2% in July from the previous month, down from a 0.3% increase in June. Their forecast is for a 0.3% gain in retail sales, compared with 0.4% in June.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

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