Treasury yields retreat as U.S.-China tensions boost demand for safe assets

Treasury yields declined on Monday as renewed geopolitical tensions helped boost demand for bond-market safety plays. Bond yields move inversely to prices, rising as prices fall, and vice-versa. The yield on the 2-year Treasury note declined by 1.2 basis points to 3.974%. The yield on the 10-year Treasury note retreated by 4.3 basis points to 3.383%. The yield on the 30-year Treasury note declined by 4.6 basis points to 3.575%. Analysts attributed the strength in bonds to the latest tiff between Beijing and Washington after a U.S. Navy destroyer sailed through waters near the Spratly Islands in the South China Sea, a key nexus for global trade which is claimed by Beijing. “The overnight price action was credited to an increase in geopolitical saber-rattling following reports that the US Navy sent a destroyer through waters near the Spratly Islands claimed by Beijing,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

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