NEW YORK, Aug 3 (Reuters) - Yields on 7-year notes led the fall in U.S. government bond yields across maturities on Friday as China unveiled retaliatory tariffs on $60 billion of American-made goods and as American job growth slowed more than expected in July.
The 5-, 7- and 10-year note yields all fell more than 2 basis points in midmorning trade, with the 7-year yield down 2.5 basis points from late Thursday to 2.910 percent. The benchmark 10-year note yield was last at 2.964 percent, down 2.2 basis points from yesterday.
Nonfarm payrolls increased by 157,000 jobs last month, below the increase of 190,000 expected by economists polled by Reuters. The slowdown came as employment in the transportation and utilities sectors fell, but a drop in the unemployment rate suggested that the labor market was tightening.
“It was a bit of a mixed bag, but overall the latest in a series of strong numbers,” said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee.
Yields were little moved after the employment data was released at 8:30 a.m. EDT (1230 GMT), suggesting the fall in yields owed more to the ratcheting up of trade tension with China. “The trade war fears are probably going to overshadow the jobs report,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
China’s finance ministry on Friday announced retaliatory tariffs on $60 billion worth of U.S. goods ranging from liquefied natural gas to some aircraft and warned of further measures, signaling that it will not back down in a protracted trade war with Washington.
The increase in trade tension drove investors to seek safety in the Treasury market, driving up prices and knocking yields.
Treasury yields were little moved by the rise in German and French sovereign debt prices during the European session, as investors concerned about the Italian budget fled to safety. Even after Italian Prime Minister Giuseppe Conte said on Friday the government had fixed the framework of its 2019 budget, Italian investors concerned about Rome’s spending plans sold government bonds and the statistics bureau said the economy would keep slowing.
“The most important thing about the Treasury market this morning is that it has really looked past ... consternation with regards to Italy,” said Vogel. “The fact we’ve sort of contained global issues to their regional sponsors and countries and there hasn’t been contagion has allowed Treasuries to move back up to a more normal state.” (Reporting by Kate Duguid; editing by Jonathan Oatis)