10-year Treasury yield to the highest in 7 years

Treasury bond yields rose early Wednesday, extending the week's rise as investors watched past trade tensions.

The yield on 10-year treasury bills

TMUBMUSD10Y, -0.06%

up 1.1 basis points to 3.059%, close to the seven-year high at 3.109%. The yield of the 2-year note

TMUBMUSD02Y, + 0.01%

was up 2.807%, a record level in December, while the 30-year bond yield

TMUBMUSD30Y, + 0.07%

up 0.9 basis points to 3.204%, the highest since May 22. Bond prices move in the opposite direction of returns.

The bond market continued to be under pressure as equities around the world swept away the growing trade tensions resulting from the US decision to impose a 10% tariff on an additional $ 200 billion. of the year. China responded by imposing tariffs on US exports of $ 60 billion, prompting President Donald Trump to target an even wider range of Chinese products.

See: How fears of war have become less of a factor for stock investors

Asian stock markets continued their ascent. The Japanese Nikkei

NIK + 1.08%

and the Shanghai Composite

SHCOMP, + 1.14%

finished higher by more than 1%. The United States helped to ease the demand for valuable goods, such as US government paper.

Analysts believe that tariffs can have contradictory consequences on the bond market. If they spur price pressures, bonds may suffer, but if the economy slows down because of weaker trade, bonds can flourish.

"We still believe that it is possible to reach a settlement in the first half of 2019, the risks that the trade war will exceed our current assumptions have increased. If that happened, the impact on the US economy would probably be more significant, "Deutsche Bank analysts said.

They estimated that if the US imposed a 25% tariff on Chinese imports at $ 250 billion, inflation could rise by 50 basis points, or 0.50 percentage points.

Some investors fear that China will use other means than tariffs to retaliate against the US, with some suggesting that the second-largest economy could sell its Treasury holdings to drive up state borrowing costs. -United. According to the report of the International Treasury Capitol, widely viewed, China's holdings in the US government newspaper fell to $ 1.17 trillion in July, their lowest level in six months.

Regarding data, the number of housing starts in August will arrive at 8:30 am Eastern time. Economists surveyed by MarketWatch expect an annualized pace of $ 1.249 million.

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