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10-year Treasury yield plunges below 1.74% after China counters US trade action

The yield on the benchmark 10-year Treasury note fell below 1.74% on Monday, its lowest level since November 2016, after China countered new U.S. tariffs, escalating the protracted trade war between globe's two biggest economies.

The yield on the benchmark 10-year Treasury note, used as a benchmark for mortgage and auto loan rates, fell 12 basis points to 1.735%, its lowest level since Nov. 9, 2016. The yield on the 30-year Treasury bond fell 9 basis points to 2.293%, while the rate on the 2-year Treasury dropped 12 basis points to 1.581%. Bond yields move inversely to prices.

The 10-year Treasury note yield, down more than 30 basis points in August, returned less than the 3-month Treasury bill at 2.017%.

The bid for Treasurys and pivot away from stocks came after actions by China fueled a new wave of trade anxiety across global markets.

China, which has in the past tinkered with its currency to boost its exports, allowed the yuan to fall to its lowest level in more than a decade, making Chinese exports cheaper. The onshore yuan broke above 7 per U.S. dollar, drawing the online ire of President Donald Trump, who voiced his complaint on Twitter.

"China dropped the price of their currency to an almost a historic low. It's called 'currency manipulation.' Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!"

Trump's criticism on Monday came less than three months after his Treasury Department decided not to label China a currency manipulator. Despite promises to label Beijing as such during Trump's 2016 presidential campaign, the administration has passed on five opportunities to do so thus far.

Bloomberg News also reported that Beijing has asked state-owned companies to refrain from buying U.S. agricultural goods.

These moves came four days after Trump announced that the U.S. on Sept. 1 would impose a 10% tariff the remaining $300 billion worth of Chinese imports that had eluded duties. The news pushed the S&P 500 to its worst weekly performance of the year. The S&P 500 dropped 31% last week. The Dow had its second-biggest weekly drop of 2019 last week, sliding 2.6%.

U.S. Markets Overview: Treasurys chart