Markets unsettled by US-China trade rhetoric as yields fall

Global markets remained unsettled after a late-week escalation in U.S.-China trade rhetoric pushed investors toward safe havens, briefly knocking down Treasury yields and the dollar before a flurry of weekend comments and countermeasures reversed some moves. President Trump’s threat to substantially increase tariffs on China late last week prompted risk off flows that depressed yields and the greenback, traders said, while subsequent remarks from U.S. officials and Chinese measures, including special port fees, renewed uncertainty over the weekend.

The market reaction was pronounced in government bond markets. The 10-year Treasury yield fell roughly 6.5 basis points on the week to about 4.05 percent, and the two-year yield slipped to roughly 3.53 percent, according to market data. Those declines weighed on the U.S. dollar, with the DXY index trading near multi-day lows in the high 98 area after a pullback from earlier strength. Swap and futures pricing shifted toward easier policy, pricing in roughly 47 to 48 basis points of easing by year end and more than 110 basis points cumulatively through 2026.

Currency and commodity moves reflected the shifting risk tone. The Australian...