Bonds

Treasury yields fall to lowest levels in a month amid trade war threat

U.S. government debt prices rose on Tuesday, as investors remain concerned about President Donald Trump's threat to hike tariffs on Chinese goods as soon as Friday.

The yield on the benchmark 10-year Treasury note, which moves inversely to price, fell to 2.444%, the lowest level since April 1, while the yield on the 30-year Treasury bond was also lower at around 2.87%.

Treasurys

Traders are closely following trade relations between the U.S. and China. U.S. Trade Representative Robert Lighthizer told reporters that the U.S. will increase levies on Chinese imports on Friday.

Lighthizer's comment came after President Donald Trump announced Sunday an increase in current tariffs of 10% on $200 billion of Chinese goods to 25% on Friday. In a Twitter post, he also threatened to impose an extra 25% levies on an additional $325 billion of Chinese goods "shortly".

Chinese Vice Premier Liu He is expected to join a delegation in the United States this week, raising hopes of a trade agreement despite the latest round of duties.

"While China's Liu He is apparently planning to attend trade talks in the US on Thursday/Friday, the prospects for a compromise anytime soon have been materially lowered," Ian Lyngen, head of U.S. rates at BMO Capital Markets, said in a note on Tuesday. The developments on trades "have reinforced the bullish underpinnings so evident this week," he said.

On the data front, there is job openings and labor turnover survey (JOLTS) due at 10 a.m. ET; and consumer credit numbers due at 3 p.m. ET.

In terms of auctions, there will be a sale of $38 billion in 3-year notes.