US Treasury prices gained on Thursday on rising risk aversion as President Donald Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China. Under the terms of the memorandum, Trump will target the Chinese imports only after a consultation period, a measure that will give industry lobbyists and legislators a chance to water down a proposed target list which runs to 1,300 products.
"There seems to be too much uncertainly about what all these trade tariffs are going to lead to," said Tom di Galoma, a managing director at Seaport Global Holdings in New York. Benchmark 10-year notes gained 18/32 in price to yield 2.841 percent, down from 2.907 percent on Wednesday.
The yield curve between two-year and 10-year notes flattened to 55 basis points from 58 basis points.
Declining stocks boosted demand for lower-risk bonds. Concerns about a more hawkish Federal Reserve also eased after the US central bank on Wednesday raised interest rates and forecast two more hikes for 2018, instead of the three that many market participants had expected.
"The Fed didn't really surprise yesterday. Some people were looking for 2018 to be possibly four rate hikes, and it's still a possibility, but for now it just keeps the status quo," said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.
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