Treasurys rise, sending yields lower as investors seek safety amid Trump's tariff threat

KEY POINTS

• Officials in Beijing are considering whether to back out of trade talks with the U.S. that were scheduled for this week.
• Both countries had indicated over the last weeks that they had made progress in their trade discussions.

U.S. government debt prices rose on Monday morning, as investors flew to safety after President Donald Trump said the White House will impose higher tariffs on Chinese goods.

The yield on the benchmark 10-year Treasury note, which moves inversely to price, fell to 2.48%, the lowest since May 1, while the yield on the 30-year Treasury bond was also lower at around 2.9163%.

"A flight to quality is to be expected if a U.S.-China trade agreement falls apart," said Gary Pzegeo, head of fixed income at CIBC U.S. Private Wealth Management. "A reversal on trade at this point could trample any green shoots emerging in the global growth story and increase the risk of a broader pull-back that could engulf the U.S. and lead to lower Treasury yields."

Treasurys

TICKER	COMPANY	YIELD	CHANGE
US1M	U.S. 1 Month Treasury	5.353%	UNCH
US3M	U.S. 3 Month Treasury	5.396%	+0.001
US6M	U.S. 6 Month Treasury	5.387%	+0.005
US1Y	U.S. 1 Year Treasury	5.203%	+0.038
US2Y	U.S. 2 Year Treasury	4.931%	+0.053
US10Y	U.S. 10 Year Treasury	4.479%	+0.045
US30Y	U.S. 30 Year Treasury	4.583%	+0.033

Traders are reacting to news overnight that Trump has decided to raise 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".

Officials in Beijing are considering whether to back out of trade talks with the U.S. that were scheduled for this week. Both countries had indicated over the last weeks that they had made progress in their trade discussions.

In terms of auctions, there will be a sale of $75 billion in 13 to 26-week bills.