US Treasury yields slipped on Monday with benchmark yields posting their biggest one-day drop in more than two weeks as investor jitters over President Donald Trump's tough stance on trade spurred safe-haven demand for bonds.
Moves to restrict trade, and scant details on proposed tax cuts, infrastructure spending and deregulation, have prompted some investors to reassess the level of possible future government stimulus to bolster the US economy.
On Monday, Trump told US manufacturing executives he would impose a hefty border tax on firms that import products to the United States after moving American factories overseas.
"The trade comments were a bit unsettling so stocks sold off, offering Treasuries some safe-haven support," said John Canavan, market strategist at Stone & McCarthy Research Associates in Princeton, New Jersey.
"The market might want to see tax cuts and infrastructure spending first, but this shouldn't be a surprise. Renegotiation of trade agreements is what he campaigned on," said Mike Lorizio, senior fixed-income trader at Manulife Asset Management in Boston.
The yield on benchmark 10-year Treasury notes was down 6 basis points at 2.403 percent, marking its steepest single-day drop since January 5, according to Reuters data.
Thirty-year yields declined 6 basis points to 2.985 percent, while two-year yield decreased 5 basis points to 1.147 percent.
There have been signs some investors have scaled back on bearish bond bets due to prospects for faster growth and inflation under a Trump administration and a Republican-controlled Congress.
Speculators reduced net shorts in US five-year and 10-year T-note futures from record high levels last week, according to Commodity Futures Trading Commission data on Friday.
The safety bid for Treasuries was mitigated by upcoming sales of coupon-bearing government debt supply.
The US Treasury Department will sell $88 billion in coupon-bearing debt later this week: $26 billion in two-year notes on Tuesday; $34 billion in five-year debt on Wednesday and $28 billion in seven-year notes on Thursday.
Treasuries issuance will compete with another wave of investment-grade corporate bond supply, estimated at $20 billion to $25 billion this week, according to IFR, a Thomson Reuters unit.