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U.S. government bonds were pulled in polarizing directions as fears of U.S.- China trade war faded but worries over Italy's new coalition government escalated.
Italy's bond yields surged as two anti-establishment parties move nearer towards establishing a political government.
The 10-year Treasury note was little changed at 3.065 percent, keeping it near the seven-year intraday peak of 3.125 percent hit last Friday. In the previous week, the benchmark 10-year Treasury note yield recorded its biggest weekly rally since April 20.
The two-year note yield edged up just more than two basis points to 2.570 percent, while the 30-year bond rate declined by less than a basis point to 3.205 percent. It notched a 9.8 basis point increase over the span of the previous week, its biggest of such move since april 20.
Sentiment across financial markets was generally positive, reducing the appetite for safe-haven bonds, after Treasury Secretary Mnuchin said over the weekend that the Trump administration would postpone implementing levies on Chinese goods and put the trade war between the two countries “on hold”. However, later, a conflicting statement came from U.S. trade representative Robert Lighthizer who said the Trump administration may still choose to impose the tariffs. On Monday, Mnuchin said Trump administration officials have the same position on the issue.
But the respite from the issue was offset by geopolitical concerns in Italy. A selloff in Italian bonds prevented Treasury prices from declining, as investors flocked to haven assets like U.S. government paper and German debt.
