Sino-american trade tensions weigh on investor sentiment

10-year Treasury yield retreats to lowest level since September 2017

The yield on the benchmark 10-year Treasury fell to a 20-month low on Tuesday as escalating trade tensions between the US and China continued to sour appetite for risk assets.

The yield on the 10-year note, which moves inversely to price, fell as much as 4.9 basis points to 2.271 per cent, the lowest since September 26, 2017. That on the 30 year was down 4.8 bps at 2.7023 per cent, a 17-month low. The two-year yield was 3.3 bps lower at 2.1307 per cent.

Treasury prices have been rallying all through the month of May amid growing fears the deadlock in trade talks and the escalating tit-fortat tariff battle will throw a spanner into US and Chinese economic growth. The latest moves in bond

yields come after President Donald Trump warned on Monday that US tariffs on goods from China could still “go up very, very substantially, very easily.”

“As far as China is concerned, they want to make a deal. I think they probably wish they made the deal that they had on the table before they tried to renegotiate it,” said Mr Trump during a state visit to Japan.

“We’re not ready to make a deal. We’re taking in tens of billions of dollars in tariffs, and that number could go up very, very substantially, very easily,” he added.

The heated rhetoric has kept equities under pressure. Meanwhile, the 10-year bond yield has fallen by nearly 23 bps since the start of the month, putting it on track for its biggest monthly drop since March.