U.S. Government Bonds Fall After Volatile Week

U.S. government bond prices retreated Friday to close out a week of volatile trading that saw Treasury yields fall to fresh multiyear lows.

The yield on the benchmark 10-year Treasury note rose for a second consecutive day, settling at 1.731% from 1.710% Thursday. The yield has declined by 0.303 percentage point since the start of the month.

Yields, which climb when bond prices fall, rose as investors scaled back positions in U.S. government debt they had built up during a week of unsettled trading, analysts said. The move to higher yields didn’t reflect any significant change in sentiment, they said.

“Headwinds to growth and inflation remain intact,” said Jon Hill, an interest-rate strategist at BMO Capital Markets. “I don’t think there’s been a broad rethinking of the general landscape.”

Yields fell earlier Friday after President Trump said that trade talks between the U.S. and China scheduled for next month could be canceled. Mr. Trump told reporters on Friday that the planned talks may not take place. The president also said things are “very well with China,” but that he’s “not ready to make a deal.”

The comments were the latest in a series of developments that have ratcheted up investors’ anxiety about trade tensions between the two nations. U.S. government bond yields have declined sharply since last week after Mr. Trump said that he would impose new tariffs on an additional $300 billion of Chinese goods.

That decision prompted China to retaliated by suspending purchases of U.S. agricultural products and allowing its currency to decline versus the dollar below a levels where its policy makers have previously supported the currency. The U.S. responded by designating China a currency manipulator.

The WSJ Dollar Index, which measures the currency against a basket of 16 others, was little changed at 90.76

German government bond yields fell Friday after turmoil in Italy’s governing coalition raised concerns about that country’s ability to pass a budget. That sent European investors to the safety of the region’s benchmark credit

The yield on the 10-year German bund declined to a recent negative 0.582%, near a record low, while the yield on Italian sovereign debt spiked, rising almost one-quarter percentage point to a recent 1.801%.

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

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