2017.08.1500:24:00UTC+00U.S. Government Bond Yields Rally on Easing North Korea Tensions

Treasury yields rallied, with benchmark yields rallying up from six-week troughs on indications of weakening tensions between the U.S. and North Korea, causing investors to trim their holdings of safe-haven assets.

Comments from the New York Federal Reserve President William Dudley that he is in favor of another interest rate increase if the economic developments would meet his expectations also emphasized the increase in yields.

In the previous week, yields fell as investors amassed Treasuries and other low-risk assets amid worries that a military showdown will occur between the two countries over Pyongyang's goal to hit the U.S. mainland with nuclear missiles.

Since the weekend, South Korean President Moon Jae-in called for a peaceful solution to the dispute, while a U.S. official downplayed a military conflict. These comments seemed to pacify investors and shed some of their government paper holdings.

Yield on the benchmark 10-year Treasury note stood at 2.225 percent, 4 basis points up from the prior session. Two-year note yields rose 3 basis points to 1.326 percent. Two-year yields reached an eight-week low of 1.286 percent after the weaker-than-anticipated data for July.