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US Treasury yields fall as investors monitor global trade concerns

Key Points
  • Market focus is largely attuned to concerns over global trade shortly before initial U.S. and Chinese tariffs are due to take effect.
  • The Department of Labor will issue its monthly report on the employment situation Friday.

U.S. government debt yields ticked lower Tuesday morning as fears of a global trade dispute weighed on economic sentiment ahead of the Department of Labor's June jobs report, scheduled for release on Friday.

The yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at 2.838 percent, while the yield on the yield on the 30-year Treasury bond was also lower at 2.965 percent.

The yield curve, a set of interest rates watched closely by bond market pros, has gotten to its flattest level since before the financial crisis. The spread between 2-year note yields and 10-year yields is around 30 basis points, down from about 90 basis points one year ago.

The fear is that the flattening yield curve could invert, meaning that short-term rates would exceed longer-term yields, typically viewed as a recession signal.

U.S. Markets Overview: Treasurys chart

Market focus is largely attuned to concerns over global trade shortly before initial U.S. and Chinese tariffs are due to take effect. President Donald Trump’s administration is set to activate tariffs on Chinese goods worth around $34 billion on Friday, which is then widely expected to trigger a tit-for-tat response from Beijing.

Meanwhile, oil prices rose Tuesday amid ongoing supply disruptions in Canada and Libya. International benchmark Brent crude traded at around $77.89 during early morning deals, around 0.8 percent higher while U.S. West Texas Intermediate (WTI) stood at $74.72, up more than 1 percent.

New orders for U.S.-made goods unexpectedly rose in May, climbing 0.4 percent amid strong demand for machinery, the Commerce Department said Tuesday. Economists polled by Reuters had forecast factory orders to be unchanged for the month.

Yields floated higher on Monday after the Institute for Supply Management report its index of national factory activity jumped to a reading of 60.2 last month from 58.7 in May.

"Demand remains robust, but the nation's employment resources and supply chains continue to struggle," said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. "Respondents are overwhelmingly concerned about how tariff-related activity is and will continue to affect their business."

A separate report from the Commerce Department on Monday showed construction spending increased 0.4 percent in May. Data for April was revised down to show construction outlays rising 0.9 percent instead of the previously reported 1.8 percent surge.