US Treasury yields fell on Wednesday, pressured by worsening trade tensions between the United States and China after a media report said the Trump government is considering limits to Chinese video surveillance firm Hikvision's ability to buy American technology. In afternoon trading, US 10-year note yields fell to 2.39% from 2.426% late on Tuesday.
Yields on US 30-year bonds slid to 2.815% from 2.842% on Tuesday. On the short end of the curve, US 2-year yields were down at 2.228% from Tuesday's 2.258%. Investors were also spooked by developments in Britain's troubled attempt to exit the European Union, fueling declines in US long-dated yields after hitting one-week highs the previous session.
Even the Federal Reserve's minutes of its last monetary policy failed to take the spotlight from the US-China trade conflict and Brexit. As expected, the Fed minutes released on Wednesday showed no surprises.
Over the last few days, the US-China trade saga has been front and center of bond investors' radar.
The New York Times reported late Tuesday that the US Commerce Department may require that US companies obtain government approval to supply components to Hikvision, limiting the company's access to technology that helps power its equipment.
That came after Washington on Tuesday temporarily eased curbs against Chinese telecommunications equipment maker Huawei Technologies.
Overall, analysts believe the United States has the upper hand in its trade war with the world's second largest economy.
"Some have suggested that China will deliberately deplete its holdings of Treasuries in order to hit back at the US if it ratchets up their trade war," said John Higgins, chief markets economist at Capital Economics
Aside from China, UK worries continued to help boost US bond prices, after Prime Minister Theresa May's final ploy to win support for her Brexit plan failed to win over either opposition lawmakers or many in her own party.
May further resisted growing calls to resign on Wednesday, vowing to press on despite mounting opposition from lawmakers and even some of her own ministers to her latest Brexit gambit.
The Fed minutes released Wednesday afternoon failed to generate excitement for investors, although one analyst said the comments were on the hawkish side.
Eric Stein, co-director of global income group at Eaton Vance Management in Boston said the re-escalation in the trade tension between US and China could change the Fed's outlook.
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