US Treasury yields eased on Thursday, a day after 10-year notes hit a 10-week high, as investors sought the safety of government debt with trade tensions between the United States and China escalating once again. China on Thursday urged the United States to "calm down" and return to reason after the Trump administration sought to increase pressure for trade concessions by proposing a higher 25 percent tariff on $200 billion worth of Chinese imports.
Trade tensions have served as a headwind for Treasury yields the last few months, although the general trend remained tilted to the upside on the strength of a higher US interest rate outlook. Treasuries also moved in tandem with Japanese government bond yields earlier, which fell after the Bank of Japan unexpectedly bought 5-to-10-year bonds worth 400 billion yen in order to stanch a selloff that lifted the 10-year yield to its highest since February 2017.
Shorter-dated bonds were hit hardest, with the 2-year Japanese note down nearly a basis point. US yields, however, moved in narrow ranges on Thursday ahead of Friday's US nonfarm payrolls report for July. "The market was pretty much back and forth. We're just waiting for tomorrow's payrolls," said Tom Simons, money market economist at Jefferies in New York.
Wall Street economists saw US jobs slipping to 190,000 in July, from 213,000 the previous month, according to a Reuters poll. Jefferies' forecasts 215,000 jobs, consistent with initial US jobless claims numbers and other employment indicators, Simons said. In afternoon trading, US 10-year yields fell to 2.985 percent, from 3.003 percent late on Wednesday.
US 30-year yields were also down at 3.12 percent, from 3.127 percent the previous session. On the front end of the curve, US 2-year yields slipped to 2.665 percent, from Wednesday's 2.682 percent. Shares on Wall Street traded initially lower in the morning session, but recovered in the afternoon after Apple Inc became the first publicly traded US company worth a trillion dollars.
The rise in US equities, however, failed to move US rates higher in afternoon trading. Thursday's range-bound price action was accompanied by equally lackluster volume, said Ian Lyngen, head of US rates strategy, at BMO Capital Markets in New York.
Volumes were relatively normally distributed as 5-year notes took a 34 percent market share and 10s claimed second place with 27 percent, Lyngen added.
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