NEW YORK: US Treasury yields fell on Thursday, with longer-dated yields staying above five-week lows, as China and the United States held tense trade talks ahead of the Trump administration's plan to impose higher tariffs on
Chinese imports on Friday.
The safe-haven demand for Treasuries came ahead of the government's sale of $19 billion in new 30-year bonds at 1 p.m. (1700 GMT). That would be the final leg of its $84 billion quarterly refunding which is expected to
raise $28.6 billion in fresh cash from investors.
Beijing and Washington had seemed close to a trade agreement until last weekend, when US President Donald Trump announced his intention to hike tariffs on $200 billion of Chinese goods to 25% from 10% on Friday, with his negotiators saying China was backtracking on earlier commitments.
A Chinese delegation led by Vice Premier Liu He arrived in Washington to salvage a deal, calling for the US to meet China halfway.
Investors worry that the world's two biggest economies may not reach an agreement by Friday, leading to a continuing trade war between them that would slow global growth and business activities and hurt corporate profits.
"I don't think we are going to get an all-clear sign on Friday," said Blake Gwinn, head of front-end rates strategy at NatWest Markets in Stamford, Connecticut. "This could keep rolling along for weeks or months."
At 9:31 a.m. (1331 GMT), the yields on benchmark 10-year Treasury notes were down 4.4 basis points at 2.439%. They decreased to a five-week low of 2.4260% on Wednesday.
The Treasury complex's initial rally on Wednesday came to a halt on hopes for a US-China trade pact. It slipped into negative territory after a dismal $27 billion 10-year note auction.
The overall bidding for 10-year supply was the weakest in more than 11 years.
There was some speculation China might have pared its bidding for the benchmark issue due to Trump's threat on more tariffs, but most analysts concluded the reduced demand stemmed from general jitters over US-China trade tensions.
"The one comforting takeaway is that there are no strong signs that China is pulling back as a consequence of the heightened tension in the trade talks," Tom Simons, senior money market strategist at Jefferies LLC, wrote in a research note.